[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/hal/journl/hal-01505766.html
   My bibliography  Save this paper

International transmission of bubble crashes in a two-country overlapping generations model

Author

Listed:
  • Lise Clain-Chamosset-Yvrard

    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

  • Takashi Kamihigashi

    (RIEB, Kobe University - Kobe University)

Abstract
We study the international transmission of bubble crashes by analyzing stationary sunspot equilibria in a two-country overlapping generations exchange economy with stochastic bubbles. We consider two cases of sunspot shocks. In the first case, we assume that only the foreign country receives a sunspot shock, while in the second, we assume that both countries independently receive sunspot shocks. In the first case, a bubble crash in the foreign country is always accompanied by a bubble crash in the home country. In the second case, a bubble crash in the foreign country can have a positive or negative effect on the home bubble. We also show that there exists a unique locally isolated stationary sunspot equilibrium, and that it is locally unstable.

Suggested Citation

  • Lise Clain-Chamosset-Yvrard & Takashi Kamihigashi, 2017. "International transmission of bubble crashes in a two-country overlapping generations model," Post-Print hal-01505766, HAL.
    • Handle: RePEc:hal:journl:hal-01505766
    DOI: 10.1016/j.jmateco.2016.01.004
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Alberto Martin & Jaume Ventura, 2012. "Economic Growth with Bubbles," American Economic Review, American Economic Association, vol. 102(6), pages 3033-3058, October.
    2. Charles P. Kindleberger & Robert Z. Aliber, 2005. "Manias, Panics and Crashes," Palgrave Macmillan Books, Palgrave Macmillan, edition 0, number 978-0-230-62804-5, March.
    3. Wigniolle, B., 2014. "Optimism, pessimism and financial bubbles," Journal of Economic Dynamics and Control, Elsevier, vol. 41(C), pages 188-208.
    4. Michael Ehrmann & Marcel Fratzscher & Roberto Rigobon, 2011. "Stocks, bonds, money markets and exchange rates: measuring international financial transmission," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 26(6), pages 948-974, September.
    5. Michael B. Devereux & James Yetman, 2010. "Leverage Constraints and the International Transmission of Shocks," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(s1), pages 71-105, September.
    6. Franklin Allen & Douglas Gale, 2000. "Financial Contagion," Journal of Political Economy, University of Chicago Press, vol. 108(1), pages 1-33, February.
    7. Ventura, Jaume, 2012. "Bubbles and capital flows," Journal of Economic Theory, Elsevier, vol. 147(2), pages 738-758.
    8. Miao, Jianjun, 2014. "Introduction to economic theory of bubbles," Journal of Mathematical Economics, Elsevier, vol. 53(C), pages 130-136.
    9. Yoshiro Tsutsui & Kenjiro Hirayama, 2010. "How Fast Do Tokyo And New York Stock Exchanges Respond To Each Other? An Analysis With High‐Frequency Data," The Japanese Economic Review, Japanese Economic Association, vol. 61(2), pages 175-201, June.
    10. Kaminsky, Graciela L. & Reinhart, Carmen M., 2000. "On crises, contagion, and confusion," Journal of International Economics, Elsevier, vol. 51(1), pages 145-168, June.
    11. Takashi Kamihigashi, 2015. "A Simple No-Bubble Theorem for Deterministic Sequential Economies," Discussion Paper Series DP2015-38, Research Institute for Economics & Business Administration, Kobe University.
    12. Takashi Kamihigashi, 2008. "The spirit of capitalism, stock market bubbles and output fluctuations," International Journal of Economic Theory, The International Society for Economic Theory, vol. 4(1), pages 3-28, March.
    13. Martin, Alberto & Ventura, Jaume, 2015. "The international transmission of credit bubbles: Theory and policy," Journal of Monetary Economics, Elsevier, vol. 76(S), pages 37-56.
    14. Takashi Kamihigashi, 2011. "Recurrent Bubbles," The Japanese Economic Review, Japanese Economic Association, vol. 62(1), pages 27-62, March.
    15. Mara Madaleno & Carlos Pinho, 2012. "International stock market indices comovements: a new look," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 17(1), pages 89-102, January.
    16. Emmanuel Farhi & Jean Tirole, 2012. "Bubbly Liquidity," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 79(2), pages 678-706.
    17. Bernett, Richard C., 1992. "Speculation, incomplete currency market participation, and nonfundamental movements in nominal and real exchange rates," Journal of International Economics, Elsevier, vol. 33(1-2), pages 167-186, August.
    18. Miao, Jianjun & Wang, Pengfei, 2015. "Banking bubbles and financial crises," Journal of Economic Theory, Elsevier, vol. 157(C), pages 763-792.
    19. Kamihigashi, Takashi, 2001. "Necessity of Transversality Conditions for Infinite Horizon Problems," Econometrica, Econometric Society, vol. 69(4), pages 995-1012, July.
    20. Ajay Tandon & Yong Wang, 2003. "Confidence in Domestic Money and Currency Substitution," Economic Inquiry, Western Economic Association International, vol. 41(3), pages 407-419, July.
    21. Takashi Kamihigashi, 2015. "A Simple No-Bubble Theorem for Deterministic Dynamic Economies," Discussion Paper Series DP2015-24, Research Institute for Economics & Business Administration, Kobe University.
    22. Ricardo J. Caballero, 2006. "On the Macroeconomics of Asset Shortages," NBER Working Papers 12753, National Bureau of Economic Research, Inc.
    23. Steven Russell, 2003. "Quasi-fundamental exchange rate variation," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 22(1), pages 111-140, August.
    24. Jianjun Miao & Pengfei Wang, 2012. "Bubbles and Total Factor Productivity," American Economic Review, American Economic Association, vol. 102(3), pages 82-87, May.
    25. Philippe Weil, 1987. "Confidence and the Real Value of Money in an Overlapping Generations Economy," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 102(1), pages 1-22.
    26. Spear, Stephen E, 1989. "Are Sunspots Necessary?," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 965-973, August.
    27. Manuelli, Rodolfo E & Peck, James, 1990. "Exchange Rate Volatility in an Equilibrium Asset Pricing Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(3), pages 559-574, August.
    28. Betts, Caroline M & Smith, Bruce D, 1997. "Money, Banking, and the Determination of Real and Nominal Exchange Rates," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(3), pages 703-734, August.
    29. Takashi Kamihigashi, 1998. "Uniqueness of asset prices in an exchange economy with unbounded utility," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 12(1), pages 103-122.
    30. Takashi Kamihigashi, 2015. "A Simple No-Bubble Theorem," Discussion Paper Series DP2015-03, Research Institute for Economics & Business Administration, Kobe University.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Boucekkine, Raouf & Kazuo, Nishimura & Venditti, Alain, 2017. "Introduction to international financial markets and banking systems crises," Journal of Mathematical Economics, Elsevier, vol. 68(C), pages 87-91.
    2. Hirano, Tomohiro & Toda, Alexis Akira, 2024. "Bubble economics," Journal of Mathematical Economics, Elsevier, vol. 111(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Lise Clain-Chamosset-Yvrard & Takashi Kamihigashi, 2015. "International Transmission of Bubble Crashes in a Two-Country Overlapping Generations," Discussion Paper Series DP2015-43, Research Institute for Economics & Business Administration, Kobe University.
    2. Lise Claini-Chamosset-Yvrard & Takashi Kamihigashi, 2015. "International Transmission of Bubble Crashes: Stationary Sunspot Equilibria in a Two-Country Overlapping Generations Model," Discussion Paper Series DP2015-21, Research Institute for Economics & Business Administration, Kobe University.
    3. Hirano, Tomohiro & Toda, Alexis Akira, 2024. "Bubble economics," Journal of Mathematical Economics, Elsevier, vol. 111(C).
    4. Alberto Martin & Jaume Ventura, 2018. "The Macroeconomics of Rational Bubbles: A User's Guide," Annual Review of Economics, Annual Reviews, vol. 10(1), pages 505-539, August.
    5. Bengui, Julien & Phan, Toan, 2018. "Asset pledgeability and endogenously leveraged bubbles," Journal of Economic Theory, Elsevier, vol. 177(C), pages 280-314.
    6. Mathieu Boullot, 2017. "Secular Stagnation, Liquidity Trap and Rational Asset Price Bubbles," Working Papers halshs-01295012, HAL.
    7. Miao, Jianjun & Wang, Pengfei & Zhou, Jing, 2015. "Asset bubbles, collateral, and policy analysis," Journal of Monetary Economics, Elsevier, vol. 76(S), pages 57-70.
    8. Takashi Kamihigashi, 2015. "A Simple No-Bubble Theorem for Deterministic Dynamic Economies," Discussion Paper Series DP2015-24, Research Institute for Economics & Business Administration, Kobe University.
    9. Marco Airaudo, 2017. "Complex stock price dynamics under Max Weber’s spirit of capitalism hypothesis," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 64(1), pages 47-73, June.
    10. Takashi Kamihigashi, 2015. "A Simple No-Bubble Theorem for Deterministic Sequential Economies," Discussion Paper Series DP2015-38, Research Institute for Economics & Business Administration, Kobe University.
    11. Aoki, Kosuke & Nikolov, Kalin, 2015. "Bubbles, banks and financial stability," Journal of Monetary Economics, Elsevier, vol. 74(C), pages 33-51.
    12. 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.
    13. Daisuke Ikeda & Toan Phan, 2016. "Toxic asset bubbles," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 61(2), pages 241-271, February.
      • Daisuke Ikeda & Toan Phan, 2016. "Toxic asset bubbles," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 61(2), pages 241-271, February.
    14. Miao, Jianjun, 2014. "Introduction to economic theory of bubbles," Journal of Mathematical Economics, Elsevier, vol. 53(C), pages 130-136.
    15. Clain-Chamosset-Yvrard, Lise & Seegmuller, Thomas, 2015. "Rational bubbles and macroeconomic fluctuations: The (de-)stabilizing role of monetary policy," Mathematical Social Sciences, Elsevier, vol. 75(C), pages 1-15.
    16. Takashi Kamihigashi & Ryonghun Im, 2022. "Two Types of Asset Bubbles in a Small Open Economy," Discussion Paper Series DP2022-15, Research Institute for Economics & Business Administration, Kobe University.
    17. Takashi Kamihigashi, 2015. "A Simple No-Bubble Theorem," Discussion Paper Series DP2015-03, Research Institute for Economics & Business Administration, Kobe University.
    18. Bidian, Florin, 2016. "Robust bubbles with mild penalties for default," Journal of Mathematical Economics, Elsevier, vol. 65(C), pages 141-153.
    19. Raurich, Xavier & Seegmuller, Thomas, 2019. "On the interplay between speculative bubbles and productive investment," European Economic Review, Elsevier, vol. 111(C), pages 400-420.
    20. Wigniolle, B., 2014. "Optimism, pessimism and financial bubbles," Journal of Economic Dynamics and Control, Elsevier, vol. 41(C), pages 188-208.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:journl:hal-01505766. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.