Gao S, Hou C, Nguyen BH, March 2020, Forecasting natural gas prices using highly flexible time-varying parameter models paper no. 30/2020.

Cheong J, Kwak DW, Tang KK, March 2020, Trade elasticity: Estimates from product-level data paper no. 29/2020.

Pagan A, Robinson T, March 2020, Too many shocks spoil the interpretation paper no. 28/2020.

Tchatoka FD, Haque Q, March 2020, On bootstrapping tests of equal forecast accuracy for nested models paper no. 27/2020.

Liu W, March 2020, Demographic change, carbon convergence and climate policy paper no. 26/2020.

Carvalho C, Eusepi S, Moench E, Preston B, March 2020, Anchored inflation expectations paper no. 25/2020.

Celik SK, Kose MA, Ohnsorge FL, March 2020, Subdued potential growth: Sources and remedies paper no. 24/2020.

Kose MA, Nagle PSO, Ohnsorge FL, Sugawara N, March 2020, Can this time be different? Policy options in times of rising debt paper no. 23/2020.

Liu W, McKibbin W, March 2020, Macroeconomic impacts of global demographic change on Australia paper no. 22/2020.

Liu W, McKibbin W, March 2020, Global macroeconomic impacts of demographic change paper no. 21/2020.

Liu W, Poonpolkul P, March 2020, Demographic impacts on life cycle portfolios and financial market structures paper no. 20/2020.

McKibbin W, Fernando R, March 2020, The global macroeconomic impacts of COVID-19: Seven scenarios paper no. 19/2020.

Fry-McKibbin R, Souza RS, February 2020, Disentangling commodity demand, commodity supply, and international liquidity shocks on an emerging market paper no. 18/2020.

Triggs A, McKibbin WJ, February 2020, Global implications of a US-led currency war paper no. 17/2020.

Breunig R, Wiskich A, Wokker C, February 2020, Resource rents, political rights and civil liberties paper no. 16/2020.

Ball C, Groshenny N, Karagedikli O, Ozbilgin M, Robinson F, February 2020, Low wage growth and job-to-job transitions: Evidence from administrative data in New Zealand paper no. 15/2020.

Dennis R, Kirsanov O, February 2020, Monetary policy when preferences are quasi-hyperbolic paper no. 14/2020.

Kose MA, Ohnsorge FL, February 2020, Emerging and developing economies: Ten years after the global recession paper no. 13/2020.

Ha J, Kose MA, Otrok C, Prasad ES, February 2020, Global macro-financial cycles and spillovers paper no. 12/2020.

Di Gulmi C, Fujiwara Y, February 2020, Dual labor market, inflation, and aggregate demand in an agent-based model of the Japanese macroeconomy paper no. 11/2020.

Kose MA, Sugawara N, Terrones ME, February 2020, Global recessions paper no. 10/2020.

Koh WC, Kose MA, Nagle PS, Ohnsorge FL, Sugawara N, February 2020, Debt and financial crises paper no. 09/2020.

Kapetanios G, Price S, Tasiou M, Ventouri A, February 2020, State-level wage Phillips curves paper no. 08/2020.

Haque Q, Magnusson LM, February 2020, Identification robust empirical evidence on the Euler equation in open economies paper no. 07/2020.

Kollmann R, February 2020, Rational bubbles in non-linear business cycle models: Closed and open economies paper no. 06/2020.

Comunale M, Mongelli FP, January 2020, Who did it? A European detective story was it real, financial, monetary and/or institutional: Tracking growth in the Euro area with an atheoretical tool paper no. 05/2020.

Kavuri AS, Milne A, January 2020, Evolution or revolution? Distributed ledger technologies in financial services paper no. 04/2020.

Preston B, January 2020, The case for reform of the RBA's policy and communication strategy paper no. 03/2020.

Pontines V, January 2020, The real effects of loan-to-value limits: Empirical evidence from Korea paper no. 02/2020.

Lee JW, Kwak DW, Song E, January 2020, Aging labor, ICT capital, and productivity in Japan and Korea paper no. 01/2020.

Fujiwara I, Waki Y, December 2019, Private news and monetary policy - Forward guidance as Bayesian persuasion paper no. 91/2019.

Ferrari D, Ravazzolo F, Vespignani J, December 2019, Forecasting energy commodity prices: A large global dataset sparse approach paper no. 90/2019.

Burrell H, Vespignani J, December 2019, The industrial impact of economic uncertainty shocks in Australia paper no. 89/2019.

Ueda K, December 2019, Dynamic cost of living index for storable goods paper no. 88/2019.

Haque Q, Magnusson LM, Tomioka K, December 2019, Empirical evidence on the dynamics of investment under uncertainty in the US paper no. 87/2019.

Poonpolkul P, December 2019, Risk-sensitive preferences and age-dependent risk aversion paper no. 86/2019.

McKinnon K, November 2019, Evaluating the portfolio rebalancing hypothesis in the presence of the international goods market paper no. 85/2019.

McKinnon K, November 2019, Investigating the drivers of international comovement in real financial asset returns paper no. 84/2019.

Shields K, Tran TD, November 2019, Uncertainty in a disaggregate model: A data rich approach using Google search queries paper no. 83/2019.

Couharde C, Damette O, Generoso R, Mohaddes K, November 2019, The growth effects of El Niño and La Niña: Local weather conditions matter paper no. 82/2019.

Haque Q, Magnusson LM, February 2020, Identification robust empirical evidence on the Euler equation in open economies paper no. 07/2020.

Rational bubbles in non-linear business cycle models: Closed and open economies
Vol:
06/2020
Author name:
Kollmann R
Year:
2020
Month:
February
Abstract:
This paper studies rational bubbles in non-linear dynamic general equilibrium models of the macroeconomy. The term ‘Rational bubble’ refers to multiple equilibria due to the absence of a transversality condition (TVC) for capital. The lack of TVC can be due to an OLG population structure. If a TVC is imposed, the macro models considered here have a unique solution. Bubbles reflect self-fulfilling fluctuations in agents’ expectations about future investment. In contrast to explosive rational bubbles in linearized models (Blanchard (1979)), the rational bubbles in non-linear models here are bounded. Bounded rational bubbles provide a novel perspective on the drivers and mechanisms of business cycles. I construct bubbles (in non-linear models) that feature recurrent boombust cycles characterized by persistent investment and output expansions which are followed by abrupt contractions in real activity. Both closed and open economies are analyzed. In a non-linear two-country model with integrated financial markets, bubbles must be perfectly correlated across countries. Global bubbles may, thus, help to explain the synchronization of international business cycles.