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The Macroeconomics of Rational Bubbles: A User's Guide

Author

Listed:
  • Alberto Martin

    (Centre de Recerca en Economia Internacional, 08005 Barcelona, Spain)

  • Jaume Ventura

    (Centre de Recerca en Economia Internacional, 08005 Barcelona, Spain)

Abstract

This review provides a guide to macroeconomic applications of the theory of rational bubbles. It shows that rational bubbles can be easily incorporated into standard macroeconomic models and illustrates how they can be used to account for important macroeconomic phenomena. It also discusses the welfare implications of rational bubbles and the role of policy in managing them. Finally, it provides a detailed review of the literature.

Suggested Citation

  • Alberto Martin & Jaume Ventura, 2018. "The Macroeconomics of Rational Bubbles: A User's Guide," Annual Review of Economics, Annual Reviews, vol. 10(1), pages 505-539, August.
    • Handle: RePEc:anr:reveco:v:10:y:2018:p:505-539
    DOI: 10.1146/annurev-economics-080217-053534
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    More about this item

    Keywords

    bubbles; business cycles; credit; economic growth; financial frictions; pyramid schemes;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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