Some econometric results for the Blanchard-Watson bubble model

Soren Johansen and Theis Lange

CREATES Research Papers from Department of Economics and Business Economics, Aarhus University

Abstract: The purpose of the present paper is to analyse a simple bubble model suggested by Blanchard and Watson. The model is defined by y(t) =s(t)?y(t-1)+e(t), t=1,…,n, where s(t) is an i.i.d. binary variable with p=P(s(t)=1), independent of e(t) i.i.d. with mean zero and finite variance. We take ?>1 so the process is explosive for a period and collapses when s(t)=0. We apply the drift criterion for non-linear time series to show that the process is geometrically ergodic when p

Keywords: Time series; explosive processes; bubble models. (search for similar items in EconPapers)
JEL-codes: C32 (search for similar items in EconPapers)
Pages: 9
Date: 2011-05-09
New Economics Papers: this item is included in nep-ecm and nep-ets
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https://repec.econ.au.dk/repec/creates/rp/11/rp11_17.pdf (application/pdf)

Related works:
Working Paper: Some Econometric Results for the Blanchard-Watson Bubble Model (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:aah:create:2011-17

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