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Leverage, Endogenous Unbalanced Growth, and Asset Price Bubbles

Hirano, Tomohiro et al.
arXiv (All) · Papers
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mathematical-financetheoretical-economics
We develop a macro-finance model in which leverage creates a positive feedback loop between capital investment and land prices. When leverage is below a threshold, land prices equal the present value of rents. Relaxing leverage lowers the productivity of the marginal investor and the interest rate u
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