Abstract for: May Economic Bubbles be Good Sometimes? A Theoretical Investigation of How Bubbles Affect Privatization in Developing Countries
In this paper, we develop a model dealing with how economic bubbles arise and how they may affect privatization process in non- or little-privatized countries. After running the developed model and analyzing the results, we suggest two main propositions: First, the mechanisms inhering in the investment structures may form a structural barrier to the process of privatization in its very initial stages. Second and more interesting, while harmful to the economy from other aspects, the economic bubbles can help activate the process of privatization. The findings are supported mainly by theoretical justifications rather than empirical evidences. This work, we believe, is not necessarily a conclusive and ultimate one out of which ultimate privatization policies should be drawn. It is, rather, a directive setup based on which a modeling process can be founded so as to obtain the best policies.