The Studies On The Mechanism Of Formation, Evolvement And Existence Of Price Bubbles

Asset-price bubbles are a kind of ubiquitous economic phenomena in the world, so people are concern about it for long time. The history told us that people always taste the agony of the outbreak of bubbles after experiencing the long-term prosperity. The understanding of bubbles can help people understand the real world. No doubt, it is one of the most fascinating areas in economic theory and practice.In the reality, asset-price bubbles have important influence on one country's macroscopical economical operation. From the earliest fad about Dutch tulip to the bubbles of American Internet at the end of last century, all these bubbles are harm to the economy of the country. Now our country is under the background of economic globalization and financial reform, so various kinds of contradictions and uncertain factors in the economic system are outstanding day by day. Therefore, the further investigation of the bubble theory is necessary to take precautions against and dissolve financial risks. It can keep capital market steady and economic operation orderly. Theoretically, the study of asset-price bubbles is the front field of contemporary economics. The economist of the developed country have already made some phased achievements in this field, however, the research of domestic scholars are not systematically and deeply enough, especially it is still very limited to introduce the foreign furthest research work. So it need us to summary the results about the theory of assets price bubbles systematically, and make the research frame harmoniously and completely. Furthermore, rooted in Chinese reality, our paper will do some new work for this question.The system and deep research to rational bubbles in terms of economics began since the sixties of the 20th century and have been lasting to this day. The researchcourse can be divided into three stages: The first stage is before the eighties of the 20th century. Economist focus on analyzing for bubbles incident happened in history. The second stage began with the beginning of the eighties. Based on rational expectations theory, researchers set up the mathematical models to analyze different rational bubbles. In the third stage, the dynamic and non-linear methods were adopted to study the bubbles since the end of the eighties.The research of this text is launched along four directions mainly: Firstly, we provide the theoretical framework for deriving bubbles from a simple stochastic difference equation. A general martingale procedure is presented which enables us to deduce bubble process systematically. Secondly, we examine the existence terms of the bubbles in a general equilibrium setting. Based mainly on models with overlapping generations, we aim to answer the questions like whether bubbles can actually exist, and if so, how they influence the economy as a whole. In particularly, the impaction of the risk of bubbles on the nominal capital stock and consumption is considered explicitly. Thirdly, possible testing strategies for gaining evidence of the existence of bubbles are described. Furthermore, our paper examines the existence of bubbles in partial markets empirically. Fifthly, we explore monetary policy question in an economy subject to asset price bubbles.Rational bubbles can be defined as an out-of-balance phenomenon of economy. It is the expectations to asset prices that cause the prices deviate from fundamental unstationarily.Based on the realization of the definition of bubble, through analyzing the behavior of asset prices, exchange rates and the price level in periods of hyperinflation, we gained a simple stochastic difference equation: yt -cï¿¡[yt+1\ I,] + x, . Solving this equation and introducing a so-called generalized stochastic martingale (GSTM) process, we have distinguished three different classes of bubble processes. Firstly, the Markovian bubble processes have been examined, which depend on its own observation of the previous period; Secondly, bubbles depending on the exogenous stochastic (i.e. fundamental) process are called intrinsic bubbles; Thirdly, bubbles depending on an arbitrary exogenous, possibly stochastic process or any other event occurring outside the model are called extrinsic bubbles.According to the form and nature of rational bubbles that have already been obtained, some restrictions and arguments for theoretically ruling out bubbles have been provided and the impacts on economic efficiency have been discussed.We not only introduce the achievements of foreign economists, but also do the creative research on the influence of the risk of bubbles on the capital stock and consumption.In particular, besides less binding partial equilibrium arguments for ruling out rational bubbles there exists a general equilibrium argument mainly due to Tirole(1982, 1985), and further extended by Weil(1987, 1989), characterizing the circumstances where rational bubbles may or may not arise. Characterizing the general equilibrium setting under which rational bubbles are likely to occur, two properties of intertemporal general equilibrium models prove to be important, i.e. the number of individuals and the planning horizon. The easiest framework is that of a finite number of individuals with finite planning horizons. In this case, rational bubbles may not existence. In the case of infinite number of market agents, Tirole (1985) demonstrated that deterministic rational bubbles are possible if the growth rate of the economy is greater or equal to the growth rate of the bubbles. Weil (1987) examined the possibility of bursting bubbles and yielded the results with only slightly difference.Based on these results, we investigate the various economic effects of stochastic bubbles, which are measured by a decrease in the exogenous probability of collapsing. Our main findings can be summarized as follows: Firstly, in a dynamically inefficient economy, the existence of rational bubbles can improve the efficiency of economy; Secondly, an increase of the probability of the crash of stochastic bubbles will decelerate the nominal capital stock of the stable state and harms the welfare of older generations, but the welfare of current generations can be improved.Despite of its theoretical possibility, the existence of rational bubbles remains a question which can only be answered empirically. We present an overview of econometric methods, and introduce some new methods. In general, The method of the tests for the existence of rational bubbles can usually be divided into two kinds: indirect tests and direct tests. Indirect tests do not specify the bubble process explicitly, including Statistical tests, Variance bounds tests, Specification test, Integration and cointegration tests, and Duration dependence test. Whereas direct tests assume a well defined bubble process. Only two bubble specifications have directly been examined in literature so far: a deterministic bubble in the context of German hyperinflation and an intrinsic bubble in the context of US-stock prices. Moreover, we introduce a method in which the bubble is treated as an unobserved state vector in the state-space model and is easily estimated...