Endogenous Business Cycles with Bubbles

Author Name ASAOKA Shintaro (Institute of Economic Research, Kyoto University)
Creation Date/NO. May 2020 20-E-041
Research Project Evidence-based Policy Study on the Law and Economics of Market Quality
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By using a simple macroeconomic model, this study demonstrates the possibility that a bubble exists whether the economy is in a boom or a recession. We use an overlapping-generations model with endogenous growth. The results demonstrate that in an economy where banks can lend to consumers, there exists a single equilibrium path in which the economic growth rate fluctuates with the bubble. On the contrary, in an economy where banks cannot lend to consumers, the equilibrium path does not exist.