Working Paper
Money Is the Root of Asset Bubbles
Yu Awaya, Kohei Iwasaki, Makoto Watanabe
CESifo, Munich, 2024
CESifo Working Paper No. 10923
CESifo, Munich, 2024
CESifo Working Paper No. 10923
This paper examines how monetary expansion causes asset bubbles. When there is no monetary expansion, a bubbly asset is not created due to a hold-up problem. Monetary expansion increases buyers’ money holdings, and then, dealers are willing to buy a worthless asset from sellers, in hopes of selling it to buyers who may not know that it is worthless—a bubble now occurs.
CESifo Category
Monetary Policy and International Finance
Empirical and Theoretical Methods
Monetary Policy and International Finance
Empirical and Theoretical Methods
Keywords: bubbles, dealers, higher-order uncertainty, money
JEL Classification: D820, D830, D840, E440, E520, G120, G140