Brito, Paulo (2008): Equilibrium asset prices and bubbles in a continuous time OLG model.
Download (538Kb) | Preview
In a Yaari-Blanchard overlapping generations endowment economy, and drawing on the equivalence between Radner (R) and Arrow-Debreu (AD) equi- libria, we prove that equilibrium AD prices have an explicit representation as a double integral equation. This allows for an analytic characterization of the relationship between life-cycle and cohort heterogeneity and asset prices. For a simple distribution, we prove that bubbles may exist, and derive conditions for ruling them out.
|Item Type:||MPRA Paper|
|Original Title:||Equilibrium asset prices and bubbles in a continuous time OLG model|
|Keywords:||overlapping generations, asset pricing, bubbles, integral equations, LambertW function|
|Subjects:||G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing; Trading volume; Bond Interest Rates
D - Microeconomics > D5 - General Equilibrium and Disequilibrium > D51 - Exchange and Production Economies
|Depositing User:||Paulo Brito|
|Date Deposited:||23. Sep 2008 06:53|
|Last Modified:||24. Feb 2013 14:08|
Blanchard, O. J. (1985). Debt, Deficits and Finite Horizons. Journal of Political Economy, 93(2):223–47.
Brito, P. and Dilao, R. (2006). Equilibrium price dynamics in an overlapping- generations exchange economy. Working Paper 27/2006, Department of Economics, ISEG, Technical University of Lisbon.
Cass, D. and Yaari, M. E. (1967). Individual saving, aggregate capital accumulation, and efficient growth. In Shell, K., editor, Essays on the Theory of Optimal Economic Growth, pages 233–268. MIT Press.
Corless, R. M., Gonnet, G., Hare, D. E. G., Jeffrey, D. J., and Knuth, D. E. (1996). On the Lambert W Function. Advances in Computational Mathematics, 5:329–59.
Demichelis, S. and Polemarchakis, H. M. (2007). The determinacy of equilibrium in economies of overlapping generations. Economic Theory, 32(3):471–475.
Geanakoplos, J. (2008). Overlapping generations models of general equilibrium. Discussion Paper 1663, Cowles Foundation for Research in Economics, Yale University.
Geanakoplos, J. D. and Polemarchakis, H. M. (1991). Overlapping generations. In Hildenbrand, W. and Sonnenschein, H., editors, Handbook of Mathematical Economics, volume IV, pages 1899–1960. North Holland.
Gelfand, I. M. and Fomin, S. V. (1963). Calculus of Variations. Dover.
Polyanin, A. D. and Manzhirov, A. V. (1998). Handbook of Integral Equations. CRC Press.
Shell, K. (1971). Notes on the economics of infinity. Journal of Political Economy, 79:1002–1011.
Yaari, M. E. (1965). Uncertain lifetime, life insurance, and the theory of consumer. Review of Economic Studies, 32:137–50.