Financial Institution, Asset Bubbles and Economic Performance

Tomohiro Hirano and Noriyuki Yanagawa
Additional contact information
Tomohiro Hirano: Financial Research and Training Center, Financial Services Agency, The Japanese Government
Noriyuki Yanagawa: Faculty of Economics, University of Tokyo

No CIRJE-F-767, CIRJE F-Series from CIRJE, Faculty of Economics, University of Tokyo

Abstract: This paper explores the relation between the quality of financial institution and asset bubbles. In this paper, we will show that bubbles can improve the macro performance even if the quality of financial institution is very poor and the financial market does not work well. In this sense, the high quality of financial institution and bubbles are substitutes. We will explore, however, that they are not perfect substitutes. Bubbles may burst. If bubbles burst, the economic performance must go down if the quality of financial institution is low. Hence, we will show that not relaying on bubbles, but improving the quality of financial institution is important for long run macro performance.

Pages: 28pages
Date: 2010-10
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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http://www.cirje.e.u-tokyo.ac.jp/research/dp/2010/2010cf767.pdf (application/pdf)

Related works:
Working Paper: Financial Institution, Asset Bubbles and Economic Performance (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:tky:fseres:2010cf767

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