Bubbles and crowding-in of capital via a savings glut

This paper uncovers a novel mechanism by which bubbles crowd in capital investment. If capital is initially depressed by a binding credit constraint, injecting a bubble triggers a savings glut. Higher returns in a new bubbly equilibrium attract additional investors who expand investment at the extensive margin. We demonstrate that crowding-in through this channel is a robust phenomenon that occurs along the entire time path after bubbles are injected.

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Year of publication:	2013
Authors:	Hillebrand, Marten ; Kikuchi, Tomoo ; Sakuragawa, Masaya
Publisher:	Karlsruhe : Karlsruher Institut für Technologie (KIT), Institut für Volkswirtschaftslehre (ECON)
Subject:	rational bubbles \| savings glut \| crowding-in \| financial frictions

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Series:	KIT Working Paper Series in Economics ; 48
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	10.5445/IR/1000037162 [DOI] 771923171 [GVK] hdl:10419/88424 [Handle] RePEc:zbw:kitwps:48 [RePEc]
Classification:	E21 - Consumption; Saving ; E32 - Business Fluctuations; Cycles ; E44 - Financial Markets and the Macroeconomy
Source:	EconStor

Persistent link: https://www.econbiz.de/10010329221