Federal Reserve Bank of Richmond
Asset Bubbles and Global Imbalances
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.
Cite this item
Daisuke Ikeda & Toan Phan, Asset Bubbles and Global Imbalances, Federal Reserve Bank of Richmond, Working Paper 18-7, 23 Mar 2018.
- F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
- F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles
Keywords: Rational bubbles; global imbalances; financial frictions; credit boom
This item with handle RePEc:fip:fedrwp:18-07
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