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Financial Institution, Asset Bubbles and Economic Performance

Author

Listed:
  • Tomohiro Hirano

    (Financial Research and Training Center, Financial Services Agency, The Japanese Government)

  • Noriyuki Yanagawa

    (Faculty of Economics, University of Tokyo)

Abstract
This paper explores the relation between the quality of financial institution and asset bubbles. In this paper, we will show that bubbles can improve the macro performance even if the quality of financial in- stitution is very poor and the financial market does not work well. In this sense, the high quality of financial institution and bubbles are substitutes. We will explore, however, that they are not perfect substi- tutes. Bubbles may burst. If bubbles burst, the economic performance must go down if the quality of financial institution is low. Hence, we will show that not relaying on bubbles, but improving the quality of financial institution is important for long run macro performance.

Suggested Citation

  • Tomohiro Hirano & Noriyuki Yanagawa, 2010. "Financial Institution, Asset Bubbles and Economic Performance," CARF F-Series CARF-F-234, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    • Handle: RePEc:cfi:fseres:cf234
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    File URL: https://www.carf.e.u-tokyo.ac.jp/old/pdf/workingpaper/fseries/244.pdf
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    References listed on IDEAS

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    Cited by:

    1. Tomohiro Hirano & Noriyuki Yanagawa, 2017. "Asset Bubbles, Endogenous Growth, and Financial Frictions," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 84(1), pages 406-443.

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