Bubbly Liquidity

Farhi, Emmanuel and Tirole, Jean (2012) Bubbly Liquidity. Review of Economic Studies, 79 (2). pp. 678-706.

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Official URL: http://tse-fr.eu/pub/24443

Abstract

This paper analyzes 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 analyze extensions with firm heterogeneity and stochastic
bubbles.

Item Type: Article
Language: English
Date: 2012
Refereed: Yes
Uncontrolled Keywords: liquidity, bubbles
JEL codes: E2 - Consumption, Saving, Production, Employment, and Investment
E44 - Financial Markets and the Macroeconomy
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSE-R (Toulouse)
Site: UT1
Date Deposited: 09 Jul 2014 17:19
Last Modified: 07 Mar 2018 13:22
OAI ID: oai:tse-fr.eu:24443
URI: http://publications.ut-capitole.fr/id/eprint/15131

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