are too low. In this environment, changes in investor sentiment or market expectations can give rise to credit bubbles … instead by expectations of future credit (i.e. bubbly collateral). Credit bubbles raise the availability of credit for …We study a dynamic economy where credit is limited by insufficient collateral and, as a result, investment and output …

are too low. In this environment, changes in investor sentiment or market expectations can give rise to credit bubbles …We study a dynamic economy where credit is limited by insufficient collateral and, as a result, investment and output …, that is, expansions in credit that are backed not by expectations of future profits (i.e. fundamental collateral), but …

We develop a stylized model of economic growth with bubbles. In this model, changes in investor sentiment lead to the … appearance and collapse of macroeconomic bubbles or pyramid schemes. We show how these bubbles mitigate the effects of financial … frictions. During bubbly episodes, unproductive investors demand bubbles while productive investors supply them. These transfers …

We develop a stylized model of economic growth with bubbles. In this model, financial frictions lead to equilibrium … dispersion in the rates of return to investment. During bubbly episodes, relatively inefficient investors demand bubbles while … investment to be dynamically inefficient: otherwise, there would be no demand for bubbles. This dynamic inefficiency, however …

We develop a stylized model of economic growth with bubbles. In this model, financial frictions lead to … equilibriumdispersion in the rates of return to investment. During bubbly episodes, unproductive investors demand bubbles while productive … dynamically inefficient: otherwise, there would be no demand for bubbles. This dynamic ineficiency, however, might be generated by …

: rational bubbles and financial frictions. We explain why each of these building blocks is crucial to understand recent events …