Financial Institution, Asset Bubbles and Economic Performance
AbstractThis paper explores the relation between the quality of financial institution and asset bubbles. In this paper, we will show that bubbles can improve the macro performance even if the quality of financial institution is very poor and the financial market does not work well. In this sense, the high quality of financial institution and bubbles are substitutes. We will explore, however, that they are not perfect substitutes. Bubbles may burst. If bubbles burst, the economic performance must go down if the quality of financial institution is low. Hence, we will show that not relaying on bubbles, but improving the quality of financial institution is important for long run macro performance.
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Date of creation: Oct 2010
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Other versions of this item:
- Tomohiro Hirano & Noriyuki Yanagawa, 2010. "Financial Institution, Asset Bubbles and Economic Performance," CARF F-Series CARF-F-234, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
- NEP-ALL-2010-10-30 (All new papers)
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