Bubbles and crowding-in of capital via a savings glut

Marten Hillebrand, Tomoo Kikuchi, Masaya Sakuragawa

Research output: Contribution to journalArticlepeer-review

4 Citations (Scopus)


This paper uncovers a mechanism by which bubbles crowd in capital investment. If capital formation is initially depressed by a binding credit constraint, a bubble triggers a savings glut. Higher returns in a new bubbly equilibrium attract additional savings, which are channeled to expand investment at the extensive margin, leading to permanently higher capital, output, and wages. We demonstrate that crowding-in through this channel is a robust phenomenon that occurs along the entire time path.

Original languageEnglish
Pages (from-to)1238-1266
Number of pages29
JournalMacroeconomic Dynamics
Issue number5
Publication statusPublished - 2018 Jul 1


  • Borrowing Constraints
  • Crowding-In
  • Rational Bubbles
  • Savings Glut

ASJC Scopus subject areas

  • Economics and Econometrics


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