The Boy Who Cried Bubble: Public Warnings against Riding Bubbles

Yasushi Asako () and Kozo Ueda

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: Attempts by governments to stop bubbles by issuing warnings seem unsuccessful. This paper 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. Our model suggests that governments need to lower the probability of spurious warnings.

Keywords: Riding bubbles; crashes; public warnings; asymmetric information (search for similar items in EconPapers)
JEL-codes: C72 D82 D84 E58 G12 G18 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2014-01
New Economics Papers: this item is included in nep-cta and nep-mac
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Citations: View citations in EconPapers (6)

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https://cama.crawford.anu.edu.au/sites/default/fil ... _2014_asako_ueda.pdf (application/pdf)

Related works:
Journal Article: 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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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2014-03

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