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...

As long as bubble size is relatively small, bubbles increase production level, but once the size becomes too large, then bubbles reduce it. Given this non-monotonic relationship, this paper investigates the relationship between bubbles and government bailouts. It shows that bailouts for bursting...