Bubbly Liquidity

Authors/Editors

Research Areas

Publication Details

Output type: Journal article

Author list: Farhi E, Tirole J

Publisher: Oxford University Press

Publication year: 2012

Journal: The Review of Economic Studies (0034-6527)

Volume number: 79

Issue number: 2

Start page: 678

End page: 706

Number of pages: 29

ISSN: 0034-6527

eISSN: 1467-937X

Languages: English-Great Britain (EN-GB)

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Open access status: green

Full text URL: http://publications.ut-capitole.fr/15131/1/Tirole_15131.pdf

Abstract

This paper analyses the possibility and the consequences of rational bubbles in a dynamic economy where financially constrained firms demand and supply liquidity. Bubbles are more likely to emerge, the scarcer the supply of outside liquidity and the more limited the pledgeability of corporate income; they crowd investment in (out) when liquidity is abundant (scarce). We analyse extensions with firm heterogeneity and stochastic bubbles.

Keywords

Bubbles, E20, E44, Liquidity

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