[UTMD-112] Money is the Root of Asset Bubbles (by Yu Awaya, Kohei Iwasaki, Makoto Watanabe)

Yu Awaya, Kohei Iwasaki, Makoto Watanabe

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 as long as it does not cause high inflation, 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.