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Bubbles and Total Factor Productivity

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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. Creditdriven 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.

Document Type: Research Article

DOI: https://doi.org/10.1257/aer.102.3.82

Publication date: 2012-05-01

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