THE BOY WHO CRIED BUBBLE: PUBLIC WARNINGS AGAINST RIDING BUBBLES

Yasushi Asako () and Kozo Ueda

Economic Inquiry, 2014, vol. 52, issue 3, 1137-1152

Abstract: type="main" xml:id="ecin12084-abs-0001"> Attempts by governments to stop bubbles by issuing warnings seem unsuccessful. This article examines the effects of public warnings using a simple model of riding bubbles. We show that public warnings against a bubble can stop it if investors believe that a warning is issued in a definite range of periods commencing around the starting period of the bubble. If a warning involves the possibility of being issued too early, regardless of the starting period of the bubble, it cannot stop the bubble immediately. Bubble duration can be shortened by a premature public warning, but lengthened if it is late.(JEL D82, E58, G18)

Date: 2014
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Related works:
Working Paper: The Boy Who Cried Bubble: Public Warnings against Riding Bubbles (2014)
Working Paper: The boy who cried bubble: public warnings against riding bubbles (2014)
Working Paper: The Boy Who Cried Bubble: Public Warnings Against Riding Bubbles (2012)
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