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Asset Bubbles and Global Imbalances†

Asset Bubbles and Global Imbalances† AbstractWe analyze the relationships between bubbles, capital flows, and economic activities in a rational bubble model with two large open economies. We establish a reinforcing relationship between global imbalances and bubbles. Capital flows from South to North facilitate the emergence and the size of bubbles in the North. Bubbles in the north in turn facilitate South-to-North capital flows. The model can simultaneously explain several stylized features of recent bubble episodes. (JEL E32, E44, F44, G01, G14, O16) http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png American Economic Journal: Macroeconomics American Economic Association

Asset Bubbles and Global Imbalances†

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Publisher
American Economic Association
Copyright
Copyright © 2019 © American Economic Association
ISSN
1945-7715
DOI
10.1257/mac.20140286
Publisher site
See Article on Publisher Site

Abstract

AbstractWe analyze the relationships between bubbles, capital flows, and economic activities in a rational bubble model with two large open economies. We establish a reinforcing relationship between global imbalances and bubbles. Capital flows from South to North facilitate the emergence and the size of bubbles in the North. Bubbles in the north in turn facilitate South-to-North capital flows. The model can simultaneously explain several stylized features of recent bubble episodes. (JEL E32, E44, F44, G01, G14, O16)

Journal

American Economic Journal: MacroeconomicsAmerican Economic Association

Published: Jul 1, 2019

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