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Asset Price Bubbles in the Kiyotaki-Moore Model

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  • Hirano, Tomohiro
  • Inaba, Masaru

Abstract

We 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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File URL: http://mpra.ub.uni-muenchen.de/36632/
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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 36632.

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Date of creation: Dec 2010
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Handle: RePEc:pra:mprapa:36632

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Related research

Keywords: Bubbly Dynamics; Contagion; Welfare Effects of Bubbles;

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  1. Kazuo Ueda, 2011. "Japanfs Deleveraging since the 1990s and the Bank of Japanfs Monetary Policy: Some Comparisons with the U.S. Experience since 2007," CARF F-Series CARF-F-259, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
  2. Jianjun Miao & PENGFEI WANG, 2011. "Bubbles and Credit Constraints," Boston University - Department of Economics - Working Papers Series WP2011-031, Boston University - Department of Economics.
  3. Kosuke Aoki & Kalin Nikolov, 2012. "Bubbles, banks and financial stability," Working Paper Series 1495, European Central Bank.
  4. Marcus Miller & Joseph Stiglitz, 2010. "Leverage and Asset Bubbles: Averting Armageddon with Chapter 11?," Economic Journal, Royal Economic Society, vol. 120(544), pages 500-518, 05.
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