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
Institutions:	Fakultät für Wirtschaftswissenschaften, Karlsruhe Institut für Technologie
Subject:	rational bubbles \| savings glut \| crowding-in \| financial frictions

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Extent:	application/pdf
Series:	Working Paper Series in Economics. - ISSN 2190-9806.
Type of publication:	Book / Working Paper
Notes:	Number 48
Classification:	E21 - Consumption; Saving ; E32 - Business Fluctuations; Cycles ; E44 - Financial Markets and the Macroeconomy
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10010954933