I review the literature on financial speculation driven by belief disagreements from a macro- economics perspective. To …-selling constraints, speculation can generate over- valuation and speculative bubbles. Leverage can substantially inflate speculative …, speculation induces pro- cyclical asset valuation. When speculation affects the price of aggregate assets, it also influences …

use search-and-bargaining theory to ascertain conditions that allow trade to temporarily freeze in decentralized markets …

This paper develops a stochastic equilibrium model of an open economy incorporating speculation in the forward exchange … market. The model is used to examine two issues. The first is the role of speculation in stabilizing the economy against … stochastic disturbances. Much risk averse speculation stabilizes domestic income against disturbances in the domestic bond market …