Sectoral bubbles, misallocation, and endogenous growth
نویسندگان
چکیده
Stock price bubbles are often on productive assets and occur in a sector of the economy. In addition, their occurrence is often accompanied by 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 in that they relax collateral constraints and improve investment efficiency. Sectoral bubbles also have a capital reallocation effect in the sense that bubbles in a sector attractmore capital to be reallocated to that sector. Their impact on economic growth depends on the interplay between these two effects. Bubbles may misallocate resources across sectors and reduce welfare. © 2013 Elsevier B.V. All rights reserved.
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