Bubbles, banks and financial stability

We build a model of rational bubbles in a limited commitment economy and show that the impact of the bubble on the real economy crucially depends on who holds the bubble. When banks are the bubble-holders, this amplifies the output boom while the bubble survives but also deepens the recession when the bubble bursts. In contrast, the real impact of bubbles held by ordinary savers is more muted.

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Year of publication:	2012
Authors:	Aoki, Kosuke ; Nikolov, Kalin
Publisher:	Frankfurt a. M. : European Central Bank (ECB)
Subject:	financial stability

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Series:	ECB Working Paper ; 1495
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	752183060 [GVK] hdl:10419/153928 [Handle] RePEc:ecb:ecbwps:20121495 [RePEc]
Source:	EconStor

Persistent link: https://www.econbiz.de/10011605540