In a dynamic general equilibrium setup, this paper highlights the role of vintages and creative destruction in business fluctuations. By stressing the forward-looking characteristic of the optimal scrapping rule, we use a standard rational expectations argument to show the constancy of the...

Macroeconomic shocks such as wil price increases induce a systematic (endogenous) response of monetary policy. We develop a VAR-based technique for decomposing the total economic effects of a given exogenous shock into the portion attributable directly to the shock and the part arising from the...

We construct asset markets, that are similar to those studied by Smith, Suchanek and Willians (1988), in which bubbles and crashes tended to occur. The main difference between the markets studied here and those studied by Smith et al. are that in the markets studied here, the fundamental values...

We report the results of an experiment designed to study the role of speculation in the formation of bubbles and crashes in laboratory asset markets. In a setting in which speculation is not possible, bubbles and crashes are observed. The results suggest that the departures from fundamental...