IDEAS home Printed from https://ideas.repec.org/p/sap/wpaper/wp182.html
   My bibliography  Save this paper

Secular Stagnation and Rational Bubbles: How Bubbles Postponed the Great Recession

Author

Listed:
  • Jacopo Bonchi

Abstract

By introducing rational bubbles in the model of Eggertsson et al. (2017), I show how their presence prevents secular stagnation, despite structural changes putting downward pressure on interest rates. Bubbles push interest rates up and allow to avoid the ZLB. The two mechanisms at work are the saving channel and the borrowing channel, which relate to the twofold function of bubbly assets: store of value and collateral. The reallocation of resources implemented through these channels implies welfare losses. These results shed light on the US economic performance before the 2007-2008 crisis.

Suggested Citation

  • Jacopo Bonchi, 2017. "Secular Stagnation and Rational Bubbles: How Bubbles Postponed the Great Recession," Working Papers in Public Economics 182, University of Rome La Sapienza, Department of Economics and Law.
    • Handle: RePEc:sap:wpaper:wp182
    as

    Download full text from publisher

    File URL: https://web.uniroma1.it/dip_ecodir/sites/default/files/wpapers/wp182.pdf
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jordi Galí, 2016. "Monetary policy and bubbles in a new Keynesian model with overlapping generations," Economics Working Papers 1561, Department of Economics and Business, Universitat Pompeu Fabra, revised Jan 2020.

    More about this item

    Keywords

    Asset price bubbles; Natural interest rate; Zero lower bound;
    All these keywords.

    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sap:wpaper:wp182. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Luisa Giuriato (email available below). General contact details of provider: https://edirc.repec.org/data/dprosit.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.