How Bubbles are Born and Burst in the Foreign Exchanges / Zum Entstehen und Platzen von Seifenblasen auf dem Devisenmarkt

Manfred Gärtner ()

Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), 1999, vol. 218, issue 3-4, 294-308

Abstract: Diba and Grossman (1987) demonstrated that the conception of a rational bubble as defined by Blanchard and Watson (1982) is impossible. The present paper shows that this impossibility theorem also applies under various imperfections and irrationalities. These are: sticky goods prices, believing in a wrong model, heterogenous expectations and learning processes. It is suggested that for any bubble to get started out of a non-bubble equilibrium individuals would have to form expectations which contradict the forecasts produced by their own personal and possibly completely misconceived model. Such inconsistent expectations would be in blatant conflict with the notion of economic man.

Keywords: Bubbles; exchange rates; noise traders; learning; Seifenblasen; Wechselkurs (search for similar items in EconPapers)
Date: 1999
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1515/jbnst-1999-3-404 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:jns:jbstat:v:218:y:1999:i:3-4:p:294-308

DOI: 10.1515/jbnst-1999-3-404

Access Statistics for this article

Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik) is currently edited by Peter Winker

More articles in Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik) from De Gruyter
Bibliographic data for series maintained by Peter Golla ().