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...

This paper analyzes the existence and the effects of bubbles in an endogenous growth model with financial frictions and heterogeneous investments. Bubbles are likely to emerge when the degree of pledgeability is in the middle range. This suggests that improving the financial market might enhance...

This paper analyzes the existence and the effects of bubbles in an endogenous growth model with financial frictions and heterogeneous investments. Bubbles are likely to emerge when the degree of pledgeability is in the middle range. This implies that improving the financial market might enhance...

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...

We study the interaction between productive and nonproductive savings in an economy that grows in the long run due to endogenous improvements in labor productivity. As in the neoclassical growth setting with overlapping generations studied by Tirole (1985), asset bubbles can exist in an economy...