, abnormally high asset prices can be caused by financial bubbles. In this model, bubbles can emerge and deflate both in cycles or … rate. This can lead to new stable equilibria, but the emergence and bursting of bubbles cannot be prevented. …

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 …

globally. The result has been a succession of bubbles and crashes, including the worldwide stock market bubble and great crash … stock market bubbles, the emerging markets bubbles and crashes in 1994 and 1997, the Long-Term Capital Management (LTCM …) crisis of 1998, the dotcom bubble bursting in 2000, the recent house price bubbles, the financialization bubble via special …