Periodic sharp sustained increases and then reversals in asset prices lead many to posit irrational price bubbles. The …

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 …

We present an extrapolative model of bubbles. In the model, many investors form their demand for a risky asset by … about fundamentals can trigger large price bubbles. We analyze the patterns of cash-flow news that generate the largest … bubbles, the reasons why bubbles collapse, and the frequency with which they occur. The model also predicts that bubbles will …

We develop a model of asset price bubbles based on the communication process between advisors and investors. Advisors …

, abound. While the role of investor contagion in asset bubbles has been explored extensively in the theoretical literature …