TY - JOUR
T1 - Asset bubbles and endogenous growth
AU - Grossman, Gene M.
AU - Yanagawa, Noriyuki
N1 - Funding Information:
Correspondence to: Gene M. Grossman, Woodrow Wilson School, Princeton University, Princeton, NJ 08544, USA. *We are grateful to Ben Bernanke. Elhanan Helpman, Paolo Pesenti, Jean Tirole, Harald Uhlig, and an anonymous referee for comments on earlier drafts. Grossman thanks the Nattonai Science Foundation for financial support.
PY - 1993/2
Y1 - 1993/2
N2 - We study the interaction between productive and nonproductive savings in economies with endogenous long-run growth. As in the neoclassical growth setting with overlapping generations, asset bubbles can exist in an economy with endogenous growth provided that they are not too large and that the growth rate in the equilibrium without bubbles exceeds the interest rate. Here, the existence conditions for bubbles reflect parameters of tastes and technology. We find that bubbles, when they exist, retard the growth of the economy, perhaps even in the long run, and reduce the welfare of all generations born after the bubble appears.
AB - We study the interaction between productive and nonproductive savings in economies with endogenous long-run growth. As in the neoclassical growth setting with overlapping generations, asset bubbles can exist in an economy with endogenous growth provided that they are not too large and that the growth rate in the equilibrium without bubbles exceeds the interest rate. Here, the existence conditions for bubbles reflect parameters of tastes and technology. We find that bubbles, when they exist, retard the growth of the economy, perhaps even in the long run, and reduce the welfare of all generations born after the bubble appears.
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U2 - 10.1016/0304-3932(93)90014-7
DO - 10.1016/0304-3932(93)90014-7
M3 - Article
AN - SCOPUS:38249005506
SN - 0304-3932
VL - 31
SP - 3
EP - 19
JO - Journal of Monetary Economics
JF - Journal of Monetary Economics
IS - 1
ER -