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Unique Equilibria in Models of Rational Asset Price Bubbles

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Listed:
  • Tomohiro Hirano
  • Alexis Akira Toda

Abstract

Existing models of rational pure bubble models feature multiple (and often a continuum of) equilibria, which makes model predictions and policy analysis non-robust. We show that when the interest rate in the fundamental equilibrium is below the economic growth rate (R

Suggested Citation

  • Tomohiro Hirano & Alexis Akira Toda, 2023. "Unique Equilibria in Models of Rational Asset Price Bubbles," CIGS Working Paper Series 23-005E, The Canon Institute for Global Studies.
    • Handle: RePEc:cnn:wpaper:23-005e
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    References listed on IDEAS

    as
    1. Carlsson, Hans & van Damme, Eric, 1993. "Global Games and Equilibrium Selection," Econometrica, Econometric Society, vol. 61(5), pages 989-1018, September.
    2. Guillaume Plantin, 2021. "Asset Bubbles and Inflation as Competing Monetary Phenomena," Sciences Po Economics Publications (main) hal-03792088, HAL.
    3. Brendan K. Beare & Alexis Akira Toda, 2022. "Determination of Pareto Exponents in Economic Models Driven by Markov Multiplicative Processes," Econometrica, Econometric Society, vol. 90(4), pages 1811-1833, July.
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    5. Balasko, Yves & Shell, Karl, 1980. "The overlapping-generations model, I: The case of pure exchange without money," Journal of Economic Theory, Elsevier, vol. 23(3), pages 281-306, December.
    6. Tomohiro Hirano & Noriyuki Yanagawa, 2017. "Asset Bubbles, Endogenous Growth, and Financial Frictions," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 84(1), pages 406-443.
    7. Awaya, Yu & Iwasaki, Kohei & Watanabe, Makoto, 2022. "Rational bubbles and middlemen," Theoretical Economics, Econometric Society, vol. 17(4), November.
    8. Tirole, Jean, 1985. "Asset Bubbles and Overlapping Generations," Econometrica, Econometric Society, vol. 53(6), pages 1499-1528, November.
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    10. Guillaume Plantin, 2021. "Asset Bubbles and Inflation as Competing Monetary Phenomena," Working Papers hal-03792088, HAL.
    11. Franklin Allen & Gadi Barlevy & Douglas Gale, 2022. "Asset Price Booms and Macroeconomic Policy: A Risk-Shifting Approach," American Economic Journal: Macroeconomics, American Economic Association, vol. 14(2), pages 243-280, April.
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    JEL classification:

    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets

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