Asset Bubbles and Endogenous Growth / Noriyuki Yanagawa, Gene M. Grossman.

Format:

Book

Author/Creator:

Yanagawa, Noriyuki.

Contributor:

National Bureau of Economic Research.

Grossman, Gene M.

Series:

Working Paper Series (National Bureau of Economic Research) no. w4004.

NBER working paper series no. w4004

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1992.

Summary:

We study the interaction between productive and nonproductive savings in an economy that grows in the long run due to endogenous improvements in labor productivity. As in the neoclassical growth setting with overlapping generations studied by Tirole (1985), asset bubbles can exist in an economy with endogenous growth provided they are not too large and that the growth rate in the equilibrium without bubbles exceeds the interest rate. Since the growth rate in the bubble-less equilibrium is endogenous, the existence condition reflects 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.

Notes:

Print version record

February 1992.