, abnormally high asset prices can be caused by financial bubbles. In this model, bubbles can emerge and deflate both in cycles or … rate. This can lead to new stable equilibria, but the emergence and bursting of bubbles cannot be prevented. …

result has been a succession of bubbles and crashes, including the worldwide stock market bubble and great crash of 19 … market bubbles and its ensuing “lost decades”, the emerging markets bubbles and crashes in 1994 and 1997, the LTCM crisis of … 1998, the dotcom bubble bursting in 2000, the recent house price bubbles, the financialization bubble via special …

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 … argue Galí's model contains additional equilibria in which more aggressive rules dampen bubbles. We show that for these …

design a laboratory experiment to test our theoretical predictions against the behaviors of human subjects. Short …