bubbles. For this we posit an overlapping generation model where productivity and credit supply are subject to random shocks …. We find that when real interest rates are lower than the rate of growth, credit financed bubbles may be welfare improving …

It is well known that rational bubbles can be sustained in balanced growth path of a deterministic economy when the … return to capital <I>r</I> is equal to the growth rate <I>g</I>. When there is a lack of stores of value, bubbles can … marginal productivity of capital. Then, bubbles further efficiency, though they cannot implement first best. While bubbles can …

Recession. In this paper I demonstrate the role of bubbles in secular stagnation. Bubbles increase the natural rate of interest …, hence they alleviate the cause of secular stagnation. This suggests a positive role for bubbles, however bubbles are … intrinsically unstable. Larger bubbles are shown to be more unstable, and upon collapse the natural rate of interest falls …

spending – combined with investment theory – to estimate the discount rates used by managers. The standard story predicts that … between 15.1% and 45.2% too much capital. These estimates suggest that, even before they burst, bubbles adversely affect …

We present an estimated dynamic stochastic general equilibrium model of stock market bubbles and business cycles using … Bayesian methods. Bubbles emerge through a positive feedback loop mechanism supported by self-fulfilling beliefs. We identify a … sentiment shock that drives the movements of bubbles and is transmitted to the real economy through endogenous credit …

This paper uncovers a novel mechanism by which bubbles crowd in capital investment. If capital is initially depressed … channel is a robust phenomenon that occurs along the entire time path after bubbles are injected. …

This paper uncovers a novel mechanism by which bubbles crowd in capital investment. If capital is initially depressed … channel is a robust phenomenon that occurs along the entire time path after bubbles are injected. …

’ heterogeneity and rational bubbles, and their normative implications for monetary policy. Heterogeneity stems from idiosyncratic … uncertainty related to participation in the asset and labor markets, and allows bubbles to emerge in equilibrium despite the fact …-policy response to bubbles, however, depends on the features of the latter …