Munich Personal RePEc Archive

Asset Price Bubbles in the Kiyotaki-Moore Model

Hirano, Tomohiro and Inaba, Masaru (2010): Asset Price Bubbles in the Kiyotaki-Moore Model.


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We examine the effect of asset price bubbles in the Kiyotaki-Moore model. We show that the dynamic interactions between bubble-asset price, land price, and output generate powerful bubbly dynamics. The boom-bust cycles in bubble-asset price cause boom-crash cycles in the land market simultaneously, like a contagion by affecting the fundamentals of land. We also numerically analyze the welfare effects of bubbles in transitional dynamics.

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