Safe Asset Shortages and Asset Price Bubbles

Kosuke Aoki, Tomoyuki Nakajima and Kalin Nikolov

No 14-006E, CIGS Working Paper Series from The Canon Institute for Global Studies

Abstract: We build a model economy in which a shortage of safe assets can create conditions for intrinsically useless 'safe' bubble assets to circulate at a positive price. Our environment features infinitely lived individuals who are not subject to credit constraints but who face uninsurable idiosyncratic production risk. Bubbly equilibria exist when safe assets offer real returns below the growth rate of the economy. Bubble assets circulate at a positive price only if they offer returns which are safe relative to production returns. These 'safe' bubbles reduce consumption volatility but exert a contractionary effect on the economy

Pages: 44
Date: 2014-05
New Economics Papers: this item is included in nep-mac
References: Add references at CitEc
Citations: View citations in EconPapers (32)

Downloads: (external link)
https://cigs.canon/article/uploads/pdf/workingpapers/140530_nakajima.pdf (application/pdf)

Related works:
Journal Article: Safe asset shortages and asset price bubbles (2014)
Working Paper: Safe Asset Shortages and Asset Price Bubbles (2014)
Working Paper: Safe Asset Shortages and Asset Price Bubbles (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cnn:wpaper:14-006e

Access Statistics for this paper

More papers in CIGS Working Paper Series from The Canon Institute for Global Studies Contact information at EDIRC.
Bibliographic data for series maintained by The Canon Institute for Global Studies ().