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 …

Recession. In this paper I demonstrate the role of bubbles in secular stagnation. Bubbles increase the natural rate of interest …, hence they alleviate the cause of secular stagnation. This suggests a positive role for bubbles, however bubbles are … intrinsically unstable. Larger bubbles are shown to be more unstable, and upon collapse the natural rate of interest falls …

We analyze the ups and downs in economic growth in recent decades by constructing a model with recurrent bubbles …, crashes, and endogenous growth. Once realized, bubbles crowd in investment and stimulate economic growth, but expectation … about future bubbles crowds out investment and reduces economic growth. We identify bubbly episodes by estimating the model …

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 …