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American Economic Review: Vol. 102 No. 3 (May 2012)


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Bubbles and Total Factor Productivity

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Miao, Jianjun, and Pengfei Wang. 2012. "Bubbles and Total Factor Productivity." American Economic Review, 102(3): 82-87.

DOI: 10.1257/aer.102.3.82


This paper presents an infinite-horizon model of production economies in which firms face idiosyncratic productivity shocks and are subject to endogenous credit constraints. Credit-driven stock price bubbles can arise which can relax credit constraints and reallocate capital more efficiently among firms. The collapse of bubbles causes a fall of total factor productivity.

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Miao, Jianjun (Boston U)
Wang, Pengfei (Central U Finance and Economics, Beijing and Zhejiang U)

JEL Classifications

E32: Business Fluctuations; Cycles
E23: Macroeconomics: Production
E44: Financial Markets and the Macroeconomy
G01: Financial Crises
O41: One, Two, and Multisector Growth Models

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