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On Existence and Bubbles of Ramsey Equilibrium with Borrowing Constraints

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  • Robert Becker

    ()
    (Indiana University.)

  • Stefano Bosi

    ()
    (EPEE, University of Evry.)

  • Cuong Le Van

    ()
    (CES, CNRS, VCREME and Hanoi WRU.)

  • Thomas Seegmuller

    ()
    (Aix-Marseille University (Aix-Marseille School of Economics), CNRS and EHESS.)

Abstract

We study the existence of equilibrium and rational bubbles in a Ramsey model with heterogeneous agents, borrowing constraints and endogenous labor. Applying a nonstandard fixed-point theorem by Gale and Mas-Colell’s (1975), we prove the existence of equilibrium in a time-truncated bounded economy. A common argument shows this solution to be an equilibrium for any unbounded economy with the same fundamentals. Taking the limit of a sequence of truncated economies, we eventually obtain the existence of equilibrium in the Ramsey model. In the second part of the paper, we address the issue of rational bubbles and we prove that they never occur in a productive economy à la Ramsey.

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Bibliographic Info

Paper provided by Aix-Marseille School of Economics, Marseille, France in its series AMSE Working Papers with number 1231.

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Length: 44 pages
Date of creation: 11 Nov 2012
Date of revision: 11 Nov 2012
Handle: RePEc:aim:wpaimx:1231

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Web page: http://www.amse-aixmarseille.fr/en
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Keywords: Ramsey equilibrium; existence; efficiency; bubbles; heterogeneous; agents; endogenous labor supply; borrowing constraint.;

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Cited by:
  1. Stefano Bosi & Cuong Le Van & Ngoc-Sang Pham, 2014. "Intertemporal equilibrium with production: bubbles and efficiency," Working Papers 2014-306, Department of Research, Ipag Business School.
  2. Kazuo Nishimura & Carine Nourry & Thomas Seegmuller & Alain Venditti, 2014. "On the (de)Stabilizing Effect of Public Debt In a Ramsey Model with Heterogeneous Agents," Discussion Paper Series DP2014-03, Research Institute for Economics & Business Administration, Kobe University.
  3. Ngoc-Sang Pham, 2013. "Collateral monetary equilibrium with liquidity constraints in an infinite horizon economy," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00848057, HAL.
  4. Robert Becker & Ram Sewak Dubey & Tapan Mitra, 2012. "On Ramsey Equilibrium: Capital Ownership Pattern and Inefficiency," Caepr Working Papers 2012-007, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington.

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