Galí (2014) showed that a monetary policy rule that raises interest rates in response to bubbles can paradoxically lead … to larger bubbles. This comment shows that a central bank that wants to dampen bubbles can always do so by raising … argue Galí's model contains additional equilibria in which more aggressive rules dampen bubbles. We show that for these …

policy in such a situation, this paper develops a dynamic model with rational bubbles and nominal rigidities. The model …

’ heterogeneity and rational bubbles, and their normative implications for monetary policy. Heterogeneity stems from idiosyncratic … uncertainty related to participation in the asset and labor markets, and allows bubbles to emerge in equilibrium despite the fact …-policy response to bubbles, however, depends on the features of the latter …