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Bubble occurrence and landing

Author

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  • Wan, Junmin

Abstract

First, a rational bubble with a stochastic crash is modelled under conditions of timelessness (or strictly a zero interest rate) and an infinite number of investors. The necessary and sufficient conditions for this bubble are a strictly positive bubble premium and a sufficient number of investors. Second, it is shown that a rational bubble occurs under a strictly negative interest rate. Finally, whether bubbles can be prevented or landed is discussed.

Suggested Citation

  • Wan, Junmin, 2024. "Bubble occurrence and landing," Journal of Financial Stability, Elsevier, vol. 70(C).
    • Handle: RePEc:eee:finsta:v:70:y:2024:i:c:s1572308923001109
    DOI: 10.1016/j.jfs.2023.101210
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    More about this item

    Keywords

    Rational bubble; Time-constrained asset; Negative interest rate; Bubble prevention; Tax;
    All these keywords.

    JEL classification:

    • D46 - Microeconomics - - Market Structure, Pricing, and Design - - - Value Theory
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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