This paper reviews some of the most prominent asset price bubbles from the past 400 years and documents how central … banks (or other institutions) reacted to those bubbles. The historical evidence suggests that the emergence of bubbles is … also suggests that a purely passive “cleaning up the mess” stance toward the buildup of bubbles is, in many cases, costly …

The efficient markets hypothesis implies that, in the presence of rational investors, bubbles cannot develop. We …

due to rational bubbles does not occur in the foreign exchange market. In this paper we consider instead a set-up in which … target zone in the presence of bubbles is viable if the Central Bank accommodates speculative attacks when the latter are … rate differential. Fundamental-dependent bubbles can account for the excess response of the exchange rate to the …

: rational bubbles and financial frictions. We explain why each of these building blocks is crucial to understand recent events …

are too low. In this environment, changes in investor sentiment or market expectations can give rise to credit bubbles …