In economics and finance, speculative bubbles take the form of locally explosive dynamics that eventually collapse. We propose a test for the presence of speculative bubbles in the context of mixed causal-noncausal autoregressive processes. The test exploits the fact that bubbles are...

The stock market operates on informed decisions based on information gathered from heterogeneous sources, encompassing diverse beliefs, strategies, and knowledge. This study examines the validity of rational bubbles in stock market prices, focusing on eight African stock markets: South Africa,...

This study theoretically considers household behavior with wealth preference and empirically investigates the validity of insatiable wealth preference using a nationally representative survey. With wealth preference, the marginal rate of substitution of asset holdings for consumption depends on...

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 then, dealers are willing to buy a worthless asset from sellers, in hopes of...

The global financial crisis (2008-2009) represents a notable example of a generally unpredicted crisis in economic history. Nevertheless, it presented features comparable to almost any previous (monetarily related) crisis episode. For instance, it was characterized by a "vicious cycle" made by...

This paper proposes concepts and methods to investigate whether the bubble patterns observed in individual time series are common among them. Having established the conditions under which common bubbles are present within the class of mixed causal-noncausal vector autoregressive models, we...

Galí (2014) showed that a monetary policy rule that raises interest rates in response to bubbles can paradoxically lead to larger bubbles. This comment shows that a central bank that wants to dampen bubbles can always do so by raising interest rates aggressively enough. This result is different...

Financial bubbles and crashes have repeatedly caused economic turmoil notably but not only during the 2008 financial crisis. However, both in the popular press as well as scientific publications, the meaning of bubble is sometimes unspecified. Due to the multitude of bubble definitions, we...

While there is a large body of literature on oil uncertainty-equity prices and/or returns nexus, an associated important question of how oil market uncertainty affects stock market bubbles remains unanswered. In this paper, we first use the Multi-Scale Log-Periodic Power Law Singularity...

Deviation of an asset price from its fundamental value, commonly referred to as a price bubble, is a well-known phenomenon in financial markets. Mathematically, a bubble arises when the deflated price process transitions from a martingale to a strict local martingale. This paper explores price...

We empirically document deviations of residential real estate prices from fundamental values at the micro level and investigate their relationship with local bank lending growth during a period of unconventional monetary policy. Our findings indicate a positive relationship between credit growth...

We construct a model of bubbles where an asset can be used as collateral primarily due to higher-order uncertainty: while both a lender and a borrower know that the intrinsic value of the asset is low, they may still believe that a “greater fool” exists who will purchase it at a much higher...

By now there are hundreds of scientific articles on experimental asset markets. Almost all of these experiments use a short and definite horizon. This may be one of the starkest differences to financial asset markets outside the laboratory, which usually have indefinite and comparatively long...

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 then, dealers are willing to buy a worthless asset from sellers, in hopes of...

In economics and finance, speculative bubbles take the form of locally explosive dynamics that eventually collapse. We propose a test for the presence of speculative bubbles in the context of mixed causal-noncausal autoregressive processes. The test exploits the fact that bubbles are...

This study theoretically considers household behavior with wealth preference and empirically investigates the validity of insatiable wealth preference using a nationally representative survey. With wealth preference, the marginal rate of substitution of asset holdings for consumption depends on...

Financial losses can have persistent effects on the financial sy stem. This paper proposes an empirical measure for the duration of these effects, S pillover P ersistence. I d ocument that Spillover Persistence is strongly correlated with financial c onditions; d uring b anking crises, Spillover...

We study scar formation and persistence after a house price bubble has burst using data on 3,089 US counties and county equivalents over the period 1980q1-2019q4. We date house price booms and busts for each county, and identify periods with explosive house price developments. Applying a sharp...