CEIS Seminars
Robert Kollmann (Université Libre de Bruxelles)

Registration opens from Sep 30, 2021 to Oct 15, 2021.
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Rational Bubbles in Non-Linear Business Cycle Models

CEIS Events

Friday 15 October 2021 h. 12:00-13:00


CEIS Tor Vergata – Microsoft Teams Webinar
Make your registation here no later than Thursday and you will receive the link


Robert Kollmann (Université Libre de Bruxelles)

This paper studies rational bubbles in non-linear dynamic general equilibrium models of the macroeconomy. The term ‘rational bubbles’ refers to multiple equilibria arising from the absence of a transversality condition (TVC) for capital. The lack of TVC can be due to an overlapping generations structure. Rational 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 stable and bounded.
Bounded bubbles can generate persistent fluctuations of real activity, and capture key business cycle stylized facts. 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.



Responsabile Scientifico
Marianna Brunetti, Furio Camillo Rosati

Barbara Piazzi