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Title:On the neutrality of credit-driven asset bubbles PDF Logo
Authors:Reicher, Christopher Phillip
Issue Date:2011
Series/Report no.:Kiel Working Papers 1679
Abstract:This paper proposes and tests a theory of credit-driven asset bubbles which are neutral in their real effects. When a lender such as a government, central bank, or banking sector is willing to lend infinitely against collateral, explosive asset bubbles can form which exactly offset a bubble in household liabilities. Surprisingly, evidence from a VAR using long-run restrictions supports the idea that asset bubbles are approximately neutral in their real effects before 2007. The evidence becomes more ambiguous if one includes post-2007 data, hinting that the post-2007 degree of comovement between asset prices and output comes from an unusual regime.
fiscal theory of the price level
collateral constraints
transversality conditions
Document Type:Working Paper
Appears in Collections:Kieler Arbeitspapiere, IfW
Publikationen von Forscherinnen und Forschern des IfW

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