Brito, Paulo (2008): Equilibrium asset prices and bubbles in a continuous time OLG model.

PDF
MPRA_paper_10701.pdf Download (551kB)  Preview 
Abstract
In a YaariBlanchard overlapping generations endowment economy, and drawing on the equivalence between Radner (R) and ArrowDebreu (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 lifecycle 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 
Language:  English 
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 
Item ID:  10701 
Depositing User:  Paulo Brito 
Date Deposited:  23. Sep 2008 06:53 
Last Modified:  24. Feb 2013 14:08 
References:  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. 
URI:  https://mpra.ub.unimuenchen.de/id/eprint/10701 