Economic Growth With Bubbles

UPF Economics and Business Working Paper 848

30 Pages Posted: 30 Nov 2005  

Jaume Ventura

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

Multiple version iconThere are 3 versions of this paper

Date Written: November 2003

Abstract

This paper presents a stylized model of economic growth with bubbles. This model views asset price bubbles as a market-generated device to moderate the effects of frictions in financial markets, improving the allocation of investments and raising the capital stock and welfare. The model illustrates various channels through which asset price bubbles affect the incentives for innovation and economic reforms, and therefore, the rate of economic growth. The model also offers a new perspective on the effects of financial development on asset price bubbles and economic growth.

Keywords: Asset price bubbles, economic growth, financial frictions, innovations and reforms

JEL Classification: E32, O40, G10

Suggested Citation

Ventura, Jaume, Economic Growth With Bubbles (November 2003). Available at SSRN: https://ssrn.com/abstract=860884 or http://dx.doi.org/10.2139/ssrn.860884

Jaume Ventura (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)

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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