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...

This paper investigates the relationship between bubbles and government bailouts. It shows that bailouts for bursting bubbles may positively influence ex-ante production efficiency and relax the existence condition of stochastic bubbles. The level of bailouts has a non-monotonic relationship...

We examine the effect of asset price bubbles in the Kiyotaki-Moore model. We show that the dynamic interactions between bubble-asset price, land price, and output generate powerful bubbly dynamics. The boom-bust cycles in bubble-asset price cause boom-crash cycles in the land market...

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...

This paper analyzes the effects of bubbles in an infitely-lived agent model of endogenous growth with financial frictions and heterogeneous agents. We provide a complete characterization on the relationship between financial frictions and the existence of bubbles. Our model predicts that if the...

This paper analyzes the effects of bubbles in an in.nitely-lived agent model of endogenous growth with .nancial frictions and heterogeneous agents. We provide a complete characterization on the relationship between .nancial frictions and the existence of bubbles. Our model predicts that if the...