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Sectoral Bubbles and Endogenous Growth

Author

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  • Jianjun Miao

    (Department of Economics, Boston University, CEMA, Central University of Finance and Economics, and AFR, Zhejiang University)

  • PENGFEI WANG

    (Department of Economics, Hong Kong University of Science and Technology, ClearWater Bay, Hong Kong.)

Abstract

Stock price bubbles are often on productive assets and occur in a sector of the economy. In addition, their occurence is often accompanied with credit booms. Incorporating these features, we provide a two-sector endogenous growth model with credit-driven stock price bubbles. Bubbles have a credit easing effect by relaxing collateral constraints and improving investment efficiency. Sectoral bubbles also have a capital reallocation effect in the sense that bubbles in a sector attract more capital to be allocated to that sector. Their impact on economic growth depends on the interplay between these two effects.

Suggested Citation

  • Jianjun Miao & PENGFEI WANG, 2011. "Sectoral Bubbles and Endogenous Growth," Boston University - Department of Economics - Working Papers Series WP2011-032, Boston University - Department of Economics.
    • Handle: RePEc:bos:wpaper:wp2011-032
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Jianjun Miao & Pengfei Wang & Lifang Xu, 2016. "Stock market bubbles and unemployment," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 61(2), pages 273-307, February.
    2. Pengfei Wang & Jianjun Miao, 2011. "Bubbles and Credit Constraints," 2011 Meeting Papers 94, Society for Economic Dynamics.
    3. Jianjun Miao & Pengfei Wang, 2012. "Bubbles and Total Factor Productivity," American Economic Review, American Economic Association, vol. 102(3), pages 82-87, May.
    4. Miao, Jianjun & Wang, Pengfei, 2015. "Banking bubbles and financial crises," Journal of Economic Theory, Elsevier, vol. 157(C), pages 763-792.
    5. Wenqing Zhao & Bing Lu & Jianyu Zhang, 2019. "Housing Prices and Corporate Innovation in China," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 9(3), pages 1-2.
    6. Zhiwei Xu & Pengfei Wang & Jianjun Miao, 2013. "A Bayesian DSGE Model of Stock Market Bubbles and Business Cycles," 2013 Meeting Papers 167, Society for Economic Dynamics.

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    More about this item

    Keywords

    Bubbles; Collateral Constraints; Externality; Economic Growth; Capital Reallocation; Multiple Equilibria;
    All these keywords.

    JEL classification:

    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G1 - Financial Economics - - General Financial Markets

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