The bubble component, B t , has to satisfy condition (12.23) to be consistent with rationality. Write
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The bubble component, Bt, has to satisfy condition (12.23) to be consistent with rationality. Write down a time series which satisfies this condition and, by considering its parameters, say what you can about its evolution over time (Try simulating it in Excel© in order to see for yourself how it behaves).
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Related Book For
Exchange Rates and International Finance
ISBN: 978-0273786047
6th edition
Authors: Laurence Copeland
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