Intangible capital, relative asset shortages and bubbles
Purely technological factors can be a fundamental force behind the emergence of asset price bubbles in developed economies. We analyze an economy in which the production technology utilizes both physical and intangible capital, where the latter cannot be used as collateral for borrowing. Technological change, in the form of increased importance of intangible capital in production, sharpens the borrowing constraints of entrepreneurs, leading to a scarcity of high-yield assets relative to low-yield ones. This can create the conditions for asset bubbles. Additionally, due to the financial frictions, standard dynamic efficiency tests are not valid, and bubbles are not Pareto improving.
Year of publication: |
2012
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Authors: | Giglio, Stefano ; Severo, Tiago |
Published in: |
Journal of Monetary Economics. - Elsevier, ISSN 0304-3932. - Vol. 59.2012, 3, p. 303-317
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Publisher: |
Elsevier |
Saved in:
Online Resource
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