DP12641 The Macroeconomics of Rational Bubbles: A User's Guide

Author(s): Alberto Martín, Jaume Ventura
Publication Date: January 2018
Keyword(s): bubbles, Business Cycles, credit, Economic Growth, Financial Frictions, pyramid schemes
JEL(s): E32, E44, O40
Programme Areas: Financial Economics, International Macroeconomics and Finance, Monetary Economics and Fluctuations, Macroeconomics and Growth
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=12641

This paper provides a guide to macroeconomic applications of the theory of rational bubbles. It shows that rational bubbles can be easily incorporated into standard macroeconomic models, and illustrates how they can be used to account for important macroeconomic phenomena. It also discusses the welfare implications of rational bubbles and the role of policy in managing them. Finally, it provides a detailed review of the literature.