Economic Growth with Bubbles
AbstractThis 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.
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Bibliographic InfoPaper provided by Barcelona Graduate School of Economics in its series Working Papers with number 204.
Date of creation: Nov 2003
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