Asset Bubbles and Investment Networks
Speaker：Wang Bin, Associate Professor, Jinan University
Host：Nie Haifeng, Professor, Lingnan College
Time and Date：10:00, April 17, 2026 (Friday)
Venue：Wang Dao Han Conference Room (101), Lingnan Hall
Language：English + Chinese
Abstract：
Why do asset bubbles in some sectors trigger deep recessions while others have limited aggregate effects? We argue that the answer lies in the investment network. We document that sectors differ significantly in their centrality, which determines how sectoral bubbles amplify liquidity premiums and capital accumulation. To formalize this mechanism, we develop a multi-sector general equilibrium model in which firms accumulate capital using cross-sector inputs, subject to financial frictions and endogenous asset bubbles. We derive a sufficient statistic, bubble centrality, which governs how sectoral financial shocks propagate through allocative efficiency (labor reallocation) and elastic capital supply (network-amplified investment). Quantitatively assessing the model against the 2007–2009 Great Recession, we resolve our motivating puzzle: the bubble capacity and burst damage of housing-related sectors are substantially larger than those of Dot-Com sectors. Furthermore, our simulated sectoral output losses closely match empirical estimates of the cross-sectional fallout following the 2008 Lehman Brothers collapse. Our analysis yields a crucial policy implication: the macroeconomic severity of an asset bubble's emergence or collapse depends fundamentally on the origin sector's centrality within the investment network.
Profile:
Wang Bin, Associate Professor at the School of Economics, Jinan University, holds a Ph.D. from City University of Hong Kong. His research focuses on macroeconomics and political economy, with specific topics including production networks, low-interest-rate environments, promotion incentives, and labor search and matching. His work has been published in journals such as Economics Letters, Journal of Comparative Economics, Journal of International Money and Finance, and Macroeconomic Dynamics.
