Asset price boom-burst cycle as an elastic money response to technological shocks

► An asset price boom-burst follows productivity advance and excessive monetary easing. ► A model of bubbly capital with fixed supply and gestation lag is constructed. ► Another important propagation device is a cash-in-advance constraint. ► An asset price bubble is triggered by an elastic money response to a productivity shock. ► Such a boom-burst can occur without nominal rigidities and economic frictions.