Should Central Banks Burst Bubbles? Some Microeconomic Issues

Dados Bibliográficos

ID9715014
AutoresJohn R Conlon (University of Mississippi, autor correspondente)
Ano2015
Volume125
Fascículo582
Páginas141-161
Data de publicação2015-02-01
Peer ReviewedSim
Open AccessSim
TipoARTICLE
PeriódicoThe Economic Journal (JOURNAL)
Identificadores do periódicoISSN: 0013-0133 • E-ISSN: 1468-0297
EditoraOxford University Press (OUP) (PUBLISHER)
DOI10.1111/ecoj.12154
OpenAlexW1986377973
IdiomaEN
Citações recebidas1
Referências 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