IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/32479.html

Credit, Land Speculation, and Long-Run Economic Growth

Author

Listed:
  • Tomohiro Hirano
  • Joseph E. Stiglitz

Abstract

This paper analyses the impact of credit expansions arising from increases in collateral values or lower interest rate policies on long-run productivity and economic growth in a two-sector endogenous growth economy with credit frictions, with the driver of growth lying in one sector (manufacturing) but not in the other (real estate). We show that it is not so much aggregate credit expansion that matters for long-run productivity and economic growth but sectoral credit expansions. Credit expansions associated mainly with relaxation of real estate financing (capital investment financing) will be productivity-and growth-retarding (enhancing). Without financial regulations, low interest rates and more expansionary monetary policy may so encourage land speculation using leverage that productive capital investment and economic growth are decreased. Unlike in standard macroeconomic models, in ours, the equilibrium price of land will be finite even if the safe rate of interest is less than the rate of output growth.

Suggested Citation

  • Tomohiro Hirano & Joseph E. Stiglitz, 2024. "Credit, Land Speculation, and Long-Run Economic Growth," NBER Working Papers 32479, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:32479
    Note: EFG
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w32479.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    Citations

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


    Cited by:

    1. Tomohiro Hirano, 2024. "Recurrent Stochastic Fluctuations with Financial Speculation," Papers 2408.05047, arXiv.org.
    2. Ansell, Ben & Daunton, Martin & Grundy, Emily & Muellbauer, John & Murphy, Michael & Offer, Avner & Smith, Susan J., 2025. "Six provocations on the origins and impacts of the UK housing emergency," LSE Research Online Documents on Economics 128781, London School of Economics and Political Science, LSE Library.
    3. Tomohiro Hirano & Alexis Akira Toda, 2024. "Rational Bubbles: A Clarification," Papers 2407.14017, arXiv.org.

    More about this item

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:nbr:nberwo:32479. 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: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.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.