| Due to thriving of virtual economy and globalization, bubble economy outbreaks have been plaguing the world, unstoppable, swinging the global economy and affect people's daily life. Via analyzing its forming mechanism of bubble economy, this paper looks into a few typical phenomena around the world so as to further investigate the potential problems of bubble economy in China.This paper firstly defined certain concepts and traits of bubble and bubble economy, distinguished between the bubble economy and economic bubble, and analyzed the correlation between bubble economy and virtual economy.The forming mechanism of bubble economy was discussed in greater detail, mainly from the microeconomic viewpoint. The forming mechanisms of rational bubbles and irrational bubbles were analyzed. The rational bubbles model justifies the existence and scale of the bubbles under the framework of partial and general equilibria. It was based on the assumptions of rational expectations and rational people, which were not applicable in the irrational bubbles model. The irrational bubbles model implies that excessive irrational behavior in reality could lead to bubble formation. The forming mechanisms of irrational bubbles were discussed using irrational models such as Fads, over-/ under-reactivity, positive feedback and spreads.This paper also focused on studying examples of bubble economy in the world. In 1990, bubbles have occurred in the stock and real estate markets, jeopardizing the blooming economy. The real estate market in Thailand has triggered bubbles that eventually lead to Asian financial crisis in 1997. Over-confidence of the US economy has resulted in the 2000"dot com"bubble burst. Different mechanisms have caused the varying effects of bubble economy in these countries, and led them to adopt different approaches to cushion the consequences of bubble bursts.We will conclude our paper by case study verification on whether there exist bubble economy in China, and put forward some proposal. |
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