Understanding Bubbly Episodes

Jaume Ventura, Vasco Carvalho and Martín, Alberto
Authors registered in the RePEc Author Service: Alberto Martin

No 8924, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Over the last two decades U.S. aggregate wealth has fluctuated substantially. Against the backdrop of the Great Recession, the effects of these boom-and-bust cycles have come to dominate academic and policy discussions. How can we explain these fluctuations in wealth? Why are these fluctuations associated with changes in consumption, investment and output? In this note, we argue that answers to these questions entail the addition of two ingredients to existent macroeconomic models: rational bubbles and financial frictions. We explain why each of these building blocks is crucial to understand recent events and how they can be seamlessly integrated in standard models

Keywords: Bubbly episodes; Dynamic inefficiency; Economic growth; Financial frictions; Bubbles (search for similar items in EconPapers)
JEL-codes: E32 E44 O40 (search for similar items in EconPapers)
Date: 2012-04
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (22)

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Related works:
Journal Article: Understanding Bubbly Episodes (2012)
Working Paper: Understanding Bubbly Episodes (2012)
Working Paper: Understanding bubbly episodes (2012)
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