It is well known that rational bubbles can be sustained in balanced growth path of a deterministic economy when the … return to capital r is equal to the growth rate g. When there is a lack of stores of value, bubbles can implement an … capital. Then, bubbles further efficiency, though they cannot implement first best. While bubbles can only be sustained when r …

It is well known that rational bubbles can be sustained in balanced growth path of a deterministic economy when the … return to capital <I>r</I> is equal to the growth rate <I>g</I>. When there is a lack of stores of value, bubbles can … marginal productivity of capital. Then, bubbles further efficiency, though they cannot implement first best. While bubbles can …

bubbles. For this we posit an overlapping generation model where productivity and credit supply are subject to random shocks …. We find that when real interest rates are lower than the rate of growth, credit financed bubbles may be welfare improving …