We develop a stylized model of economic growth with bubbles. In this model, financial frictions lead to … equilibriumdispersion in the rates of return to investment. During bubbly episodes, unproductive investors demand bubbles while productive … dynamically inefficient: otherwise, there would be no demand for bubbles. This dynamic ineficiency, however, might be generated by …

backed only by the expectation of their future value. We consider two types of unbacked assets: bubbles, which are created by … the private sector, and money, which is created by the central bank. Bubbles and money share many features, but they also … differ in two crucial respects. First, while the rents from the creation of bubbles accrue to entrepreneurs and foster …

This paper develops a general equilibrium model to examine the quantitative effects of speculative bubbles on capital … late 1990s. The welfare cost of speculative bubbles depends crucially on parameter values. Bubbles can improve welfare if …, the welfare cost of bubbles is large, typically exceeding one percent of annual consumption …

How do housing bubbles affect other economic sectors? We show that in the presence of collateral constraints, a bubble … initially raises housing credit demand and crowds out credit to non-housing firms. If the bubble lasts, however, housing credit … repayments raise banks' net worth and expand credit supply, so that crowding-out eventually gives way to crowding-in. This is …

fiscal policy. - Bubbles ; financial accelerator ; credit constraints ; financial crisis ; pyramid schemes …

future house prices which, in turn, led to a collapse in lending standards. A common feature of all bubbles which complicates … economic fallout from the recent financial crisis, central bank views on the use of monetary policy to lean against bubbles …

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 … channel is a robust phenomenon that occurs along the entire time path after bubbles are injected. …