Economics, General Economics, General Economics (econ.GN)
journal:
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date:
2023-11-06 16:00:00
Abstract
This article provides a self-contained overview of the theory of rational asset price bubbles so that non-experts including PhD students can follow the argument. We cover topics from basic definitions, properties, and classical results to frontier research, with an emphasis on bubbles attached to real assets such as stocks, housing, and land. The main message is that bubbles attached to real assets are fundamentally nonstationary phenomena related to unbalanced growth. We present a bare-bones model and draw the important insight that asset pricing implications are markedly different between balanced growth and unbalanced growth.PDF: Bubble Economics.pdf
