Macroeconomic Implications of Asset Bubbles

In this article, we review the literature studying the macroeconomic implications of asset bubbles. We first discuss the definitions of rational asset bubbles and the limitations of the standard approach. We next use examples to illustrate several mechanisms that can generate asset bubbles. We then survey macroeconomic models with asset bubbles generated by one of these mechanisms. We discuss how asset bubbles affect economic growth, business cycles, and fiscal and monetary policies in closed and open economies. We conclude by proposing several promising directions for future research.

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Publication Details

Journal
Annual Review of Financial Economics
Published
2026-08-20
DOI
https://doi.org/10.1146/annurev-financial-111824-021041
Primary Topic
Economic theories and models
Type
article
Field-Weighted Citation Impact
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article

Macroeconomic Implications of Asset Bubbles

Pengfei Wang, Jianjun Miao
Annual Review of Financial Economics
Economic theories and models
article

Macroeconomic Implications of Asset Bubbles

Pengfei Wang, Jianjun Miao
article en

Abstract

In this article, we review the literature studying the macroeconomic implications of asset bubbles. We first discuss the definitions of rational asset bubbles and the limitations of the standard approach. We next use examples to illustrate several mechanisms that can generate asset bubbles. We then survey macroeconomic models with asset bubbles generated by one of these mechanisms. We discuss how asset bubbles affect economic growth, business cycles, and fiscal and monetary policies in closed and open economies. We conclude by proposing several promising directions for future research.

Annual Review of Financial Economics
Peking University (CN), Zhejiang University of Finance and Economics (CN)
Decent work and economic growth
Openalex Percentile: Top 4%
Economic theories and models
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