Econometrica: Jan 1997, Volume 65, Issue 1

Rational Asset Pricing Bubbles

https://doi.org/0012-9682(199701)65:1<19:RAPB>2.0.CO;2-5
p. 19-57

Manuel S. Santos, Michael Woodford

This paper provides a fairly systematic study of general economic conditions under which rational asset pricing bubbles may arise in an intertemporal competitive equilibrium framework. Our main results are concerned with nonexistence of asset pricing bubbles in those economies. These results imply that the conditions under which bubbles are possible--including some well-known examples of monetary equilibria--are relatively fragile.

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