The Macroeconomic Consequences of Asset Bubbles and Crashes

Lisi Shi and Richard M. H. Suen
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Lisi Shi: University of Connecticut

No 2014-14, Working papers from University of Connecticut, Department of Economics

Abstract: This paper examines the macroeconomic effects of asset price bubbles and crashes in an overlapping generations economy. The model highlights the effects of asset price fluctuations on labor supply decisions, and demonstrates how labor market adjustment can help propagate the effects of these fluctuations to the aggregate economy. It is shown that, under certain conditions, asset bubbles can crowd in productive investment and lead to an expansion in total employment, and the bursting of these bubbles can have an immediate negative impact on these variables.

Keywords: Asset Bubbles; Overlapping Generations; Endogenous Labor (search for similar items in EconPapers)
JEL-codes: E22 E44 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2014-06
New Economics Papers: this item is included in nep-dge and nep-mac
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Working Paper: The Macroeconomic Consequences of Asset Bubbles and Crashes (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:uct:uconnp:2014-14

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