Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/88424
Authors: 
Hillebrand, Marten
Kikuchi, Tomoo
Sakuragawa, Masaya
Year of Publication: 
2013
Series/Report no.: 
Working Paper Series in Economics, Karlsruher Institut für Technologie (KIT) 48
Abstract: 
This paper uncovers a novel mechanism by which bubbles crowd in capital investment. If capital is initially depressed by a binding credit constraint, injecting a bubble triggers a savings glut. Higher returns in a new bubbly equilibrium attract additional investors who expand investment at the extensive margin. We demonstrate that crowding-in through this channel is a robust phenomenon that occurs along the entire time path after bubbles are injected.
Subjects: 
rational bubbles
savings glut
crowding-in
financial frictions
JEL: 
E21
E32
E44
Document Type: 
Working Paper

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