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Asset Price Bubbles in the Kiyotaki-Moore Model

  • Hirano, Tomohiro
  • Inaba, Masaru

We examine the effect of asset price bubbles in the Kiyotaki-Moore model. We show that the dynamic interactions between bubble-asset price, land price, and output generate powerful bubbly dynamics. The boom-bust cycles in bubble-asset price cause boom-crash cycles in the land market simultaneously, like a contagion by affecting the fundamentals of land. We also numerically analyze the welfare effects of bubbles in transitional dynamics.

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File URL: https://mpra.ub.uni-muenchen.de/36632/1/MPRA_paper_36632.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 36632.

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Date of creation: Dec 2010
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Handle: RePEc:pra:mprapa:36632
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  1. Kosuke Aoki & Kalin Nikolov, 2011. "Bubbles, Banks, and Financial Stability," CARF F-Series CARF-F-253, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
  2. Marcus Miller & Joseph Stiglitz, 2010. "Leverage and Asset Bubbles: Averting Armageddon with Chapter 11?," Economic Journal, Royal Economic Society, vol. 120(544), pages 500-518, 05.
  3. Grossman, G.M. & Yanagawa, N., 1992. "Asset Bubbles and Endogenous Growth," Papers 160, Princeton, Woodrow Wilson School - Public and International Affairs.
  4. Markus K. Brunnermeier, 2009. "Deciphering the Liquidity and Credit Crunch 2007-2008," Journal of Economic Perspectives, American Economic Association, vol. 23(1), pages 77-100, Winter.
  5. Tomohiro Hirano & Noriyuki Yanagawa, 2010. "Asset Bubbles, Endogenous Growth, and Financial Frictions," CARF F-Series CARF-F-223, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo, revised Sep 2010.
  6. Jianjun Miao & PENGFEI WANG, 2011. "Bubbles and Credit Constraints," Boston University - Department of Economics - Working Papers Series WP2011-031, Boston University - Department of Economics.
  7. Woodford, Michael, 1990. "Public Debt as Private Liquidity," American Economic Review, American Economic Association, vol. 80(2), pages 382-88, May.
  8. Kazuo Ueda, 2011. "Japan's Deleveraging since the 1990s and the Bank of Japan's Monetary Policy: Some Comparisons with the U.S. Experience since 2007," CARF F-Series CARF-F-259, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
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