This paper aims to test the theoretical policy implication on rational bubbles. Many works, including Caballero and Krishnamurthy (2006), Kocherlakota (2009), and Martin and Ventura (2011), suggested that government bonds can rule out rational bubbles. We constructed our own bubble index using the Fourier transformation technique and, as a result, found the empirical support of the theory in the case of Singapore, but not in the case of Thailand. For the case of Singapore, the credibility in an ability to collect tax and the appropriate yield of government bonds are keys to the effectiveness of such the anti-bubble policy. Moreover, we also found that expansionary fiscal policies empirically accelerate the growth of bubbles.
Keywords: Rational Bubbles, Fourier Transformation, Government Bonds, and Fiscal Policies.Bejan, C., and & Bidian, F. (2015)., Bubbles and trading in incomplete markets., Journal of Mathematical Economics, 53, (2015) 137-–144.
Bhashyam, S., Doran, A., and & Dorney, T., (1999). Time-Frequency analysis., Place of publication: Curricular Linux Environment at Rice University (CLEAR), (1999).
Blot, C., Hubert, P., and & Labondance, F., (2017). Does monetary policy generate asset price bubbles?, (CRESE Working Paper, No. xxx (2017). Place of publication: Publisher.
Buehn, A., and & Schneider, F., (2016). Size and development of tax evasion in 38 OECD countries: What do Wwe (not) Kknow? Journal of Economics and Political Economy, 3(1), (2016) 1-–11.
Caballero, R. J., and & Krishnamurthy, A., (2006). Bubbles and capital flow fluctuation: Causes and risk management., Journal of Monetary Economics, 53(1), (2006) 35-–53.
Domeji, D., and & Ellingsen, T., (2018). Rational bubbles and public debt policy: a quantitative analysis Article., Journal of Monetary Economics, 96, (2018) 109-–123.
Farhi, E., and & Tirole, J., (2012). Bubbly liquidity., Review of Economic Studies, 79(2), (2012) 678-–706.
Gali, J., (2014). Monetary policy and rational asset price bubbles., American Economic Review, 104(3), (2014) 721-–752.
Gencay, R., Selcuk, F., and & Whitcher, B., (2002). An introduction to wavelets and other filtering methods in finance and economics., San Diego: Academic Press, (2002).
Hirano, F., and & Yanagawa, N., (2017). Asset bubbles, endogenous growth, and financial frictions., Review of Economic Studies, 84(1), (2017) 406-–443.
Khokasai, J., and & Thepmongkol, A., (2018). Measuring asset price bubbles: Fourier transformation technique on Thailand’s stock price index., In Proceedings of the 12th National Conference of Economist (Thailand), (2018) (pp. xxx–xxx). Place of publication: Publisher.
Kindleberger, C. P., (1995). Asset inflation and monetary policy., BNL Quarterly Review, 192 (1995), 17-–37.
Kocherlakota, N. R., (2009). Bursting bubbles: Consequences and cures, [mimeo]., Location: University of Minnesota (2009).
Martin, A., & and Ventura, J., (2011). Theoretical notes on bubbles and the current crisis., IMF Economic Review, 59(1), (2011) 6-40.
Martin, A., and & Ventura, J., (2012). Economic growth with bubbles., American Economic Review, 102(6), (2012) 3033-–3058.
Miao, J., and & Wang, P., (2015). Sectoral bubbles, misallocation, and endogenous growth., Journal of Mathematical Economics, 53, (2015) 153-–163.
Miao, J., Wang, P., and & Zhou, J., (2015). Asset bubbles, collateral, and policy Aanalysis., Journal of Monetary Economics, 76, (2015) s57-–s70.
Pienkowski, A., (2017). Debt limits and the structure of public debt, (IMF wWorking pPaper, No. xxx). (2017) Place of publication: Publisher..
Press, W. et al., (1992). Numerical recipes in C., Place of publication: tThe Press Syndicate of the University of Cambridge, (1992).
Santos, M. S., and & Woodford, M., (1997). Rational bubble pricing., Econometrica, 65(1), (1997) 19-–57.
Shiratsuka, S., (2003). Asset price bubble in Japan in the 1980s: Lessons for financial and Macroeconomic Stability,. Place of publication: Bank of Japan, (2003).
Thepmongkol, A., and & Sethapramote, Y. (2018). Inflation and public debt dynamics in ASEAN., DLSU Business & Economics Review, 27(2), (2018) 61-–74.
Tirole, J. (1985)., Asset bBubbles and overlapping Ggenerations., Econometrica, 53(6), (1985) 1499-–1528.
Werner, J., (2015). Rational asset pricing bubbles and debt Cconstraints., Journal of Mathematical Economics, 53, (2015) 145-–152.
Weil, P., (1987). “Confidence and the real value of money in an overlapping generations economy.” The Quarterly Journal of Economics, (1987):xxx, 1-22.