Ruling-out non-stationary stochastic rational expectations bubbles when agents are non-risk-neutral

Mark Roberts

Applied Economics Letters, 1998, vol. 5, issue 7, 473-475

Abstract: The property of an independent forward-solution in the general solution to linear dynamic RE models is lost where a bubble component has non-zero higher-order moments and where the implicit agents of the model are not risk-neutral. If the conditional higher-order moments are nonstationary, the forward solution becomes process-inconsistent.

Date: 1998
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DOI: 10.1080/135048598354663

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