This paper develops a general equilibrium model to examine the quantitative effects of speculative bubbles on capital … technology, investment and consumption booms, and faster trend growth, reminiscent of the U.S. economy during the late 1920s and … late 1990s. The welfare cost of speculative bubbles depends crucially on parameter values. Bubbles can improve welfare if …

with a low effective cost of capital based on optimism about the future availability of funds for investment. The key to …. The latter is more likely if bubbles develop along the expansionary path. These (rational) bubbles can emerge even when …

with a low effective cost of capital based on optimism about the future availability of funds for investment. The key to …. The latter is more likely if bubbles develop along the expansionary path. These (rational) bubbles can emerge even when …