Asset Price Bubbles: A Selective Survey

Author/Editor:

Anna Scherbina

Publication Date:

February 21, 2013

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

Why do asset price bubbles continue to appear in various markets? This paper provides an overview of recent literature on bubbles, with significant attention given to behavioral models and rational models with frictions. Unlike the standard rational models, the new literature is able to model the common characteristics of historical bubble episodes and offer insights for how bubbles are initiated and sustained, the reasons they burst, and why arbitrage forces do not routinely step in to squash them. The latest U.S. real estate bubble is described in the context of this literature.

Series:

Working Paper No. 2013/045

Subject:

Asset bubbles Asset prices Financial crises Financial institutions Housing prices Inflation Prices Real estate prices Stocks

English

Publication Date:

February 21, 2013

ISBN/ISSN:

9781475515299/1018-5941

Stock No:

WPIEA2013045

Pages:

41

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