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Asset Bubbles, Unemployment, and Financial Market Frictions

Author

Listed:
  • Ken-ichi Hashimoto

    (Graduate School of Economics, Kobe University)

  • Ryonghun Im

    (Institute of Economic Research, Kyoto University)

  • Takuma Kunieda

    (School of Economics, Kwansei Gakuin University)

  • Akihisa Shibata

    (Institute of Economic Research, Kyoto University)

Abstract

A tractable model with infinitely lived agents is constructed for the exam- ination of bubbles and unemployment. It is demonstrated that the presence of bubbles stimulates capital accumulation and reduces unemployment. The presence of bubbles also changes the e ects of government policies that target unemployment and welfare conditions in the labor market. The main findings are as follows: (i) the presence of bubbles is more beneficial to an economy with severe credit constraints; (ii) the presence of bubbles mitigates the negative effects of taxation and unemployment benefits on unemployment and welfare; and (iii) these mitigation effects decrease as credit constraints are relaxed.

Suggested Citation

  • Ken-ichi Hashimoto & Ryonghun Im & Takuma Kunieda & Akihisa Shibata, 2020. "Asset Bubbles, Unemployment, and Financial Market Frictions," Discussion Paper Series 218, School of Economics, Kwansei Gakuin University.
  • Handle: RePEc:kgu:wpaper:218
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    References listed on IDEAS

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    More about this item

    Keywords

    Asset bubbles; Unemployment; Labor-market matching frictions; Financial frictions.;
    All these keywords.

    JEL classification:

    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • O42 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Monetary Growth Models

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