by asset price bubbles, large capital inflows and credit booms, in rich and poor countries alike …

This paper investigates the nature and the presence of bubbles in financial markets. Are bubbles consistent with … are some of the questions asked in the first three sections. The general conclusion is that bubbles, in many markets, are … consistent with rationality, that phenomena such as runaway asset prices and market crashes are consistent with rational bubbles …

-selling constraints, speculation can generate over- valuation and speculative bubbles. Leverage can substantially inflate speculative … bubbles and leverage limits depend on perceived downside risks. Shifts in beliefs about downside tail scenarios can explain … the emergence and the collapse of leveraged speculative bubbles. Speculative bubbles are related to rational bubbles, but …

We develop a stylized model of economic growth with bubbles. In this model, financial frictions lead to equilibrium … dispersion in the rates of return to investment. During bubbly episodes, unproductive investors demand bubbles while productive … dynamically inefficient: otherwise, there would be no demand for bubbles. This dynamic inefficiency, however, might be generated …

supporting the resale option theory of bubbles: investors overpay for a warrant hoping to resell it at an even higher price to a …