Should Central Banks Burst Bubbles? Some Microeconomic Issues

Datos Bibliográficos

ID9715014
AutoresJohn R Conlon (University of Mississippi, autor de correspondencia)
Año2015
Volumen125
Número582
Páginas141-161
Fecha de publicación2015-02-01
Peer ReviewedSí
Open AccessSí
TipoARTICLE
RevistaThe Economic Journal (JOURNAL)
Identificadores de la revistaISSN: 0013-0133 • E-ISSN: 1468-0297
EditorialOxford University Press (OUP) (PUBLISHER)
DOI10.1111/ecoj.12154
OpenAlexW1986377973
IdiomaEN
Citas recibidas1
Referencias citadas46

Anti‐bubble policy is examined in a finite‐horizon 'greater fool' bubble model, with rational agents, asymmetric information and short‐sales constraints. This permits the use of standard tools of welfare economics to analyse bubble policies. Policy is modelled as deflating overpriced assets by revealing information about this overpricing. If the central bank is following such a policy, then the market interprets inaction as an implicit endorsement of asset prices, which raises these prices. Also, the central bank can deflate overpriced assets even if it has no informational advantage over any investors about this overpricing. However, unless it has such an informational advantage, a bubble‐bursting rule may only make things worse

Asset (computer security · Bubble · Bursting · Central bank · Economic bubble · Economics · Macroeconomics · Market economy · Microeconomics · Monetary economics · Monetary policy · Rational expectations · Welfare · Computer Science · Economic theories and models · Financial Markets and Investment Strategies · Monetary Policy and Economic Impact