Booms and Busts in Commodity Markets: Bubbles or Fundamentals?

Booms and Busts, Bubbles and Crashes

Understanding Booms and Busts in Housing Markets∗

Some booms in housing prices are followed by busts. Others are not. It is generally diffi cult to find observable fundamentals that are useful for predicting whether a boom will turn into a bust or not. We develop a model consistent with these observations. Agents have heterogeneous expectations about long-run fundamentals but change their views because of “social dynamics.”Agents with tighter ...

BoomS and BuStS in houSing marketS determinantS and imPlicationS

In 2009 all ECB publications feature a motif taken from the €200 banknote. 1 We are grateful to Carsten Detken, Gerard Korteweg, an anonymous referee and participants at the European Central Bank seminar on booms and busts in housing markets for helpful comments. Any views expressed represent those of the authors and not necessarily those of the European Central Bank. Fax +49 69 1344 6000 All r...

Booms, Busts, and Divorce.

For almost a century, anecdotes have suggested that divorce rates decline during recessions. However, until very recently there has been surprisingly little formal empirical evidence on whether such a link exists, let alone its magnitude if it does. Moreover, the anticipated direction of the effect is ambiguous theoretically. Although previous studies have concluded that individual job loss des...

Booms and Busts in Asset Prices

We show how low-frequency boom and bust cycles in asset prices can emerge from Bayesian learning by investors. Investors rationally maximize infinite horizon utility but hold subjective priors about the asset return process that we allow to differ infinitesimally from the rational expectations prior. Bayesian updating of return beliefs then gives rise to self-reinforcing return optimism that re...