Bubble occurrence and landing

Junmin Wan

Journal of Financial Stability, 2024, vol. 70, issue C

Abstract: First, a rational bubble with a stochastic crash is modelled under conditions of timelessness (or strictly a zero interest rate) and an infinite number of investors. The necessary and sufficient conditions for this bubble are a strictly positive bubble premium and a sufficient number of investors. Second, it is shown that a rational bubble occurs under a strictly negative interest rate. Finally, whether bubbles can be prevented or landed is discussed.

Keywords: Rational bubble; Time-constrained asset; Negative interest rate; Bubble prevention; Tax (search for similar items in EconPapers)
JEL-codes: D46 D84 G18 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finsta:v:70:y:2024:i:c:s1572308923001109

DOI: 10.1016/j.jfs.2023.101210

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