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Endogenous Business Cycles With Bubbles

Author

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  • Shintaro Asaoka

    (Institute of Economic Research, Kyoto University)

Abstract

This study examines the existence of bubbles in an economy with a low growth rate. By using an overlapping-generations model with Matsuyama's (1999) production sector, it is shown a bubble exists in an economy with a low growth rate. If consumers can borrow assets when they are young, then there is a unique cycle with a bubble moving back and forth between two phases. In one phase, the output growth rate is low and innovation occurs. In the other phase, the output growth rate is high and there is no innovation. Therefore, a bubble also exists in an economy with a high growth rate. On the contrary, cycles cannot emerge if consumers save assets when they are young.

Suggested Citation

  • Shintaro Asaoka, 2018. "Endogenous Business Cycles With Bubbles," KIER Working Papers 985, Kyoto University, Institute of Economic Research.
    • Handle: RePEc:kyo:wpaper:985
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    File URL: http://www.kier.kyoto-u.ac.jp/DP/DP985.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    bubbles; endogenous growth model;

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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