Abstract

http://ssrn.com/abstract=1611433
 
 

References (20)



 
 

Citations (32)



 


 



Economic Growth with Bubbles


Alberto Martin


Universitat Pompeu Fabra - Centre de Recerca en Economia Internacional (CREI); Centre for Economic Policy Research (CEPR)

Jaume Ventura


Universitat Pompeu Fabra - Centre de Recerca en Economia Internacional (CREI); Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

April 2010

CEPR Discussion Paper No. DP7770

Abstract:     
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 relatively efficient investors supply them. Because of this, bubbly episodes channel resources towards efficient investment raising the growth rates of capital and output. The model also illustrates that the existence of bubbly episodes requires some investment to be dynamically inefficient: otherwise, there would be no demand for bubbles. This dynamic inefficiency, however, might be generated by an expansionary episode itself.

Number of Pages in PDF File: 35

Keywords: asset bubbles, dynamic inefficiency, economic growth, financial frictions, pyramid schemes

JEL Classification: E32, E44, O40

working papers series





Date posted: May 19, 2010  

Suggested Citation

Martin, Alberto and Ventura, Jaume, Economic Growth with Bubbles (April 2010). CEPR Discussion Paper No. DP7770. Available at SSRN: http://ssrn.com/abstract=1611433

Contact Information

Alberto Martin (Contact Author)
Universitat Pompeu Fabra - Centre de Recerca en Economia Internacional (CREI) ( email )
Ramon Trias Fargas, 25-27
Barcelona, 08005
Spain
Centre for Economic Policy Research (CEPR) ( email )
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
Jaume Ventura
Universitat Pompeu Fabra - Centre de Recerca en Economia Internacional (CREI) ( email )
Ramon Trias Fargas, 25-27
Barcelona, 08005
Spain
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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