Responses to “Toward Bubble Clarity: A Comment on Miao and Wang”
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Professor Jianjun Miao received his Ph.D. from the University of Rochester (2003), after completing earlier studies at University of Science…
Professor Pengfei Wang received his Ph.D. from Cornell University (2007), after completing earlier studies at Jilin University and Peking Un…
Abstract
Tomohiro Hirano and Alexis Akira Toda (2025) argue that our model (Miao and Wang 2018) does not feature a rational bubble based on the traditional definition. Their comment is more about semantics rather than about substance. They do not find any error in Miao and Wang (2018). Their argument does not apply to the Miao-Wang model, which goes beyond the traditional definition. The bubble component in the Miao-Wang model incorporates a liquidity premium and cannot be ruled out by the transversality condition.
This article is a response to Toward Bubble Clarity: A Comment on Miao and Wang by Tomohiro Hirano and Alexis Akira Toda (EJW, March 2025).
Response to this article by Tomohiro Hirano and Alexis Akira Toda: Cry Wine and Sell Vinegar: Rejoinder to Miao and Wang (EJW, September 2025).