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American Economic Journal:
Macroeconomics

ISSN 1945-7707 (Print) | ISSN 1945-7715 (Online)

Asset Bubbles and Global Imbalances

  • Daisuke Ikeda
  • Toan Phan
American Economic Journal: Macroeconomics
vol. 11, no. 3, July 2019
(pp. 209–51)
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Abstract

We analyze the relationships between bubbles, capital flows, and economic activities in a rational bubble model with two large open economies. We establish a reinforcing relationship between global imbalances and bubbles. Capital flows from South to North facilitate the emergence and the size of bubbles in the North. Bubbles in the north in turn facilitate South-to-North capital flows. The model can simultaneously explain several stylized features of recent bubble episodes.

Citation

Ikeda, Daisuke, and Toan Phan. 2019. "Asset Bubbles and Global Imbalances." American Economic Journal: Macroeconomics 11 (3): 209–51. DOI: 10.1257/mac.20140286

Additional Materials

JEL Classification

  • E32 Business Fluctuations; Cycles
  • E44 Financial Markets and the Macroeconomy
  • F44 International Business Cycles
  • G01 Financial Crises
  • G14 Information and Market Efficiency; Event Studies; Insider Trading
  • O16 Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance