This paper solves a second-best problem where a government has in particular to choose whether to tax financial inflows (capital controls) or not, and when. A multi-stage optimal control technique is used to this end. First, it is shown that it is optimal to switch in finite time from capital...

We study the role of monetary policy when asset-price bubbles may form due to herd behavior in investment in an asset whose return is uncertain. To that aim, we build a simple general equilibrium model whose agents are households, entrepreneurs, and a central bank. Entrepreneurs receive private...