Bubbles and Crowding-in of Capital via a Savings Glut

Marten Hillebrand, Tomoo Kikuchi and Masaya Sakuragawa

VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy from Verein für Socialpolitik / German Economic Association

Abstract: This paper uncovers a novel mechanism by which bubbles crowd in capital investment. If capital is initially depressed by a binding credit constraint, injecting a bubble triggers a savings glut. Higher returns in a new bubbly equilibrium attract additional investors who expand investment at the extensive margin. We demonstrate that crowding-in through this channel is a robust phenomenon that occurs along the entire time path after bubbles are injected.

JEL-codes: E21 E32 E44 (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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https://www.econstor.eu/bitstream/10419/100603/1/VfS_2014_pid_418.pdf (application/pdf)

Related works:
Journal Article: BUBBLES AND CROWDING-IN OF CAPITAL VIA A SAVINGS GLUT (2018)
Working Paper: Bubbles and crowding-in of capital via a savings glut (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc14:100603

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