Asset Price Bubbles in the Kiyotaki-Moore Model
AbstractWe examine the effect of asset price bubbles in the Kiyotaki-Moore model. We show that the dynamic interactions between bubble-asset price, land price, and output generate powerful bubbly dynamics. The boom-bust cycles in bubble-asset price cause boom-crash cycles in the land market simultaneously, like a contagion by affecting the fundamentals of land. We also numerically analyze the welfare effects of bubbles in transitional dynamics.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 36632.
Date of creation: Dec 2010
Date of revision:
Bubbly Dynamics; Contagion; Welfare Effects of Bubbles;
Find related papers by JEL classification:
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
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