'Irrational exuberance' and capital flows for the us new economy : A simple global model
Miller, Marcus, Castren, Olli and Zhang, Lei. (2007) 'Irrational exuberance' and capital flows for the us new economy : A simple global model. International Journal of Finance & Economics, Volume 12 (Number 1). pp. 89-105. ISSN 1076-9307Full text not available from this repository.
Official URL: http://dx.doi.org/10.1002/ijfe.307
In a stylized and analytically tractable model of the global economy, we first calculate the Pareto improvement when a country experiencing a favourable supply side shock consumes more against expected future Output and spreads the risk by selling shares. With capital inflows to finance the 'New Economy' significantly exceeding the current account deficit, we then show that selling shares globally at inflated prices-due to 'irrational exuberance' and/or distorted corporate incentives-can generate significant international transfers when the asset bubble bursts. Our analysis complements econometric studies showing how much the European economy was affected when the US asset boom ended.
|Item Type:||Journal Article|
|Subjects:||H Social Sciences > HG Finance|
|Divisions:||Faculty of Social Sciences > Economics|
|Journal or Publication Title:||International Journal of Finance & Economics|
|Publisher:||John Wiley & Sons Ltd.|
|Official Date:||January 2007|
|Number of Pages:||17|
|Page Range:||pp. 89-105|
|Access rights to Published version:||Restricted or Subscription Access|
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