Borrowing to purchase assets that are limited or rigid in supply – for example real estate – may become a more attractive investment due to the expectation of increasing prices than investing in reproducible capital with a lower return. Indeed it is in such a setting, combined with some additional very strong assumptions, that a sustainable “rational bubble” as depicted by Tirole emerges.
BIS central bankers’ speeches  Annex Chart 1: Time varying estimates of different specifications of the Phillips Curve  Sources: Eurostat and ECB staff calculations Note: The Phillips curve relates the inflation measure to its first two lags and the first lag of the slack measure.