TY  - JOUR
AU  - Martin,Alberto
AU  - Ventura,Jaume
TI  - Economic Growth with Bubbles
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 15870
PY  - 2010
Y2  - April 2010
UR  - http://www.nber.org/papers/w15870
L1  - http://www.nber.org/papers/w15870.pdf
N1  - Author contact info:
Alberto Martin
CREI
Universitat Pompeu Fabra
Ramon Trias Fargas, 25-27
08005 Barcelona
Spain
E-Mail: amartin@crei.cat

Jaume Ventura
CREI
Universitat Pompeu Fabra
Ramon Trias Fargas, 25-27
08005-Barcelona
SPAIN
Tel: +34 93 542 1765
Fax: +34 93 542 1860
E-Mail: jventura@crei.cat
AB  - We develop a stylized model of economic growth with bubbles. In this model, financial frictions lead to equilibrium dispersion in the rates of return to investment. During bubbly episodes, unproductive investors demand bubbles while productive investors supply them. Because of this, bubbly episodes channel resources towards productive investment raising the growth rates of capital and output. The model also illustrates that the existence of bubbly episodes requires some investment to be dynamically inefficient: otherwise, there would be no demand for bubbles. This dynamic inefficiency, however, might be generated by an expansionary episode itself.
ER  -