I analyze a general setting where a policy maker needs information that financial market traders have in order to implement her optimal policy, and market prices can potentially reveal this information. Policy decisions, in turn, affect asset values, hence forward looking traders may have...

We propose an extension of the class of rational expectations bubbles (REBs) to the more general rational beliefs setting of Kurz (1994a,b). In a potentially non-stationary but stationarizable environment, among an heterogenous population of agents, it is possible to hold more than one...

We investigate the impact of trader and cash inflow on bubble formation in asset markets with a novel design featuring heterogeneous information and a constant fundamental value. Implementing seven treatments we find that (i) only the joint inflow of traders and cash triggers bubbles...

Do all types of information benefit the efficiency of prices in the sense that they drive them closer to fundamentals compared to the situation where information does not exist? Looking at the competitive noisy rational expectations framework, the clear answer of the literature is: yes. It...

Many experiments have been conducted on market mispricing, however there is a distinct lack of guidance over how mispricing should be measured. This raises concerns about the sensitivity of mispricing results to variations in the measurement procedure. In this paper, we investigate the...

At odds with the common “rational expectations” framework for bubbles, economists like Hyman Minsky, Charles Kindleberger and Robert Shiller have documented that irrational behavior, ambiguous information or certain limits to arbitrage are essential drivers for bubble phenomena and financial...

We study the market-perceived monetary policy rule of the Bank of England (BoE) using financial market data and macroeconomic surprises. Leveraging exogenous variations in inflation and industrial production (IP) surprises around Office for National Statistics releases, we estimate gilt yield...

I develop and analyze a monetary model with liquid equity. Equity is a claim on the profits of firms acting as sellers in the search-and-matching market. Buyers in that market devote search to obtain matches with firms, and use the equity to relax a liquidity constraint. The dual nature of...