The Macroeconomics of Rational Bubbles: A User's Guide
52 Pages Posted: 22 Jan 2018
Date Written: January 2018
This paper provides a guide to macroeconomic applications of the theory of rational bubbles. It shows that rational bubbles can be easily incorporated into standard macroeconomic models, and illustrates how they can be used to account for important macroeconomic phenomena. It also discusses the welfare implications of rational bubbles and the role of policy in managing them. Finally, it provides a detailed review of the literature.
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