Bubbles and Total Factor Productivity
American Economic Review · 2012 · Volume 102 · Issue 3
Abstract
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.
Keywords
Business Fluctuations, Cycles, Macroeconomics: Production, Financial Markets and the Macroeconomy, Financial Crises, One, Two, and Multisector Growth Models
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