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Sectoral Bubbles and Endogenous Growth

Pengfei Wang () and Jianjun Miao ()

No 227, 2012 Meeting Papers from Society for Economic Dynamics

Abstract: Stock price bubbles are often on productive assets and occur in a sector of the economy. In addition, their occurence is often accompanied by credit booms. Incorporating these features, we provide a two-sector endogenous growth model with credit-driven stock price bubbles. Bubbles have a credit easing effect in that they relax collateral constraints and improve investment efficiency. Sectoral bubbles also have a capital reallocation effect in the sense that bubbles in a sector attract more capital to be reallocated to that sector. Their impact on economic growth depends on the interplay between these two effects.

Date: 2012
New Economics Papers: this item is included in nep-dge and nep-fdg
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Related works:
Working Paper: Sectoral Bubbles and Endogenous Growth (2011)
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More papers in 2012 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
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