How Bubbles are Born and Burst in the Foreign Exchanges / Zum Entstehen und Platzen von Seifenblasen auf dem Devisenmarkt
Diba and Grossman (1987) demonstrated that the conception of a rational bubble as defined by Blanchard and Watson (1982) is impossible. The present paper shows that this impossibility theorem also applies under various imperfections and irrationalities. These are: sticky goods prices, believing in a wrong model, heterogenous expectations and learning processes. It is suggested that for any bubble to get started out of a non-bubble equilibrium individuals would have to form expectations which contradict the forecasts produced by their own personal and possibly completely misconceived model. Such inconsistent expectations would be in blatant conflict with the notion of economic man.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 218 (1999)
Issue (Month): 3-4 (June)
|Contact details of provider:|| Web page: https://www.degruyter.com|
|Order Information:||Web: https://www.degruyter.com/view/j/jbnst|
When requesting a correction, please mention this item's handle: RePEc:jns:jbstat:v:218:y:1999:i:3-4:p:294-308. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Peter Golla)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.