Contagious Bubbles
活動時間♉️：10月16日10:30 – 11:30
活動地點🚴🏽：Virtual Meeting through XYLink（小魚易連）
活動演講人🚵🏽🚣🏽： Feng DONG
活動內容
Topic
Speaker
Feng DONG
Associate Professor, Tsinghua University
Abstract
This paper proposes a framework to study contagious stock bubbles in a multi-sector production economy with heterogeneous investment technologies. Due to financial frictions, stock bubbles arise endogenously that help inject additional liquidity. Due to financial linkages, the existence of bubbles in different sectors may be interdependent. Theoretically, we characterize the entire set of bubbly equilibria, and provide the condition under which the burst of bubbles in one sector spikes bubbles in other sectors. Quantitatively, we show that due to an unexpected burst of bubbles, it can generate severe a recession only when the burst happens in a vital sector and transmits to the rest of the economy.