Can Government Bond Replace Rational Bubbles? The Empirical Investigation on Singapore and Thailand

Authors

ผศ.ดร.อัธกฤตย์ เทพมงคล, นายพิเชษฐ์ กายธัญลักษณ์

Published

DLSU Business and Economics Review

Abstract

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.

(2562). Can Government Bond Replace Rational Bubbles? The Empirical Investigation on Singapore and Thailand. DLSU Business and Economics Review, 2562(2), 69-86.