This paper proposes and tests a theory of credit-driven asset bubbles which are neutral in their real effects. When a … output comes from an unusual regime. -- Bubbles ; fiscal theory of the price level ; collateral constraints ; neutrality … asset bubbles can form which exactly offset a bubble in household liabilities. Surprisingly, evidence from a VAR using long …

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 …

uninformed buyers. A central bank prevents speculative bubbles by revealing the state of the world to the entire market if at …

bubbleless regimes recurrently. Infinitely lived households expect future bubbles, which crowds out investment and reduces … economic growth. Because realized bubbles crowd in investment, their overall impact on economic growth and welfare crucially … depends on both the level of financial development and the frequency of bubbles. We examine the U.S. economic data through the …