We develop a parsimonious model of bubbles based on the assumption of imprecisely known market depth. In a speculative … possibility of bubbles depending on the risk-free rate, uncertainty about market depth, and traders’ degree of leverage. This … allows us to discuss several policy measures. Bubbles always reduce aggregate welfare. Among others, certain monetary policy …

We develop a model of rational bubbles based on the assumptions of unknown market liquidity and limited liability of … condition for whether rational bubbles are possible. Based on this analysis, we discuss several widely-discussed policy measures … with respect to their effectiveness in preventing bubbles. A reduction of manager bonuses or a Tobin tax can create or …

We construct a model of bubbles where an asset can be used as collateral primarily due to higher-order uncertainty … fool” exists who will purchase it at a much higher price. We show that such bubbles can lead to inefficient overinvestment …

Reviewing the definition and measurement of speculative bubbles in context of contagion, this paper analyses the DotCom …. Even it is astonishing, that the contagion is lower during price bubbles, the main finding indicates the presence of …

(and rally) discrete jump distributions associated with positive (and negative) bubbles. The RE condition implies that the …

Chapter Summary: We consider the recent financial crisis as an overlapping sequence of interdependent financial bubbles …

Using an agent-based model (ABM) with fundamentalists and chartists, prone to develop bubbles and crashes, we … demonstrate the usefulness of direct market intervention by a policy maker, documenting strong performance in preventing bubbles … bubbles by forming an expectation of the future return of the risky asset in the form of an exponential moving average of the …

bubbles for a certain setup of a feedback trader model. Moreover, similar studies very often face the criticism that chartists … might run out of money before the emergence of bubbles, as these studies typically analyze the role of chartists with …

calculations, they analytically prove that the presence of fundamentalists is not sufficient to avoid asset price bubbles. The …

of financial bubbles depress the real economy? This paper addresses these questions by constructing an infinite …-horizon heterogeneous agent general equilibrium model with speculative bubbles. We characterize conditions under which storable goods …, regardless of their intrinsic values, can carry bubbles and agents are willing to invest in such bubbles despite their positive …