Ruling-out non-stationary stochastic rational expectations bubbles when agents are non-risk-neutral
- 1 July 1998
- journal article
- research article
- Published by Taylor & Francis in Applied Economics Letters
- Vol. 5 (7) , 473-475
- https://doi.org/10.1080/135048598354663
Abstract
The property of an independent forward-solution in the general solution to linear dynamic RE models is lost where a bubble component has non-zero higher-order moments and where the implicit agents of the model are not risk-neutral. If the conditional higher-order moments are nonstationary, the forward solution becomes process-inconsistent.Keywords
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