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Sectoral Bubbles and Endogenous Growth

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  • Pengfei Wang

    (Hong Kong University of Science and Tech)

  • Jianjun Miao

    (Boston University)

Abstract

Stock price bubbles are often on productive assets and occur in a sector of the economy. In addition, their occurence is often accompanied by credit booms. Incorporating these features, we provide a two-sector endogenous growth model with credit-driven stock price bubbles. Bubbles have a credit easing effect in that they relax collateral constraints and improve investment efficiency. Sectoral bubbles also have a capital reallocation effect in the sense that bubbles in a sector attract more capital to be reallocated to that sector. Their impact on economic growth depends on the interplay between these two effects.

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Bibliographic Info

Paper provided by Society for Economic Dynamics in its series 2012 Meeting Papers with number 227.

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Date of creation: 2012
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Handle: RePEc:red:sed012:227

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Cited by:
  1. Pengfei Wang & Lifang Xu & Jianjun Miao, 2013. "Stock Market Bubbles and Unemployment," 2013 Meeting Papers 720, Society for Economic Dynamics.
  2. Zhiwei Xu & Pengfei Wang & Jianjun Miao, 2013. "A Bayesian DSGE Model of Stock Market Bubbles and Business Cycles," 2013 Meeting Papers 167, Society for Economic Dynamics.
  3. Jianjun Miao & Pengfei Wang, 2012. "Bubbles and Total Factor Productivity," American Economic Review, American Economic Association, vol. 102(3), pages 82-87, May.
  4. Jianjun Miao & PENGFEI WANG, 2011. "Bubbles and Credit Constraints," Boston University - Department of Economics - Working Papers Series WP2011-031, Boston University - Department of Economics.
  5. Jianjun Miao & PENGFEI WANG, 2012. "Banking Bubbles and Financial Crisis," Boston University - Department of Economics - Working Papers Series WP2012-010, Boston University - Department of Economics.

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