Injecting Rational Bubbles
AbstractThis paper proves two theorems about economies with a finite number of infinitely lived agents who trade a complete set of one-period Arrow securities and several infinitely lived securities at each date, subject to short-sales constraints. The first theorem in the paper considers an equilibrium to an economy of this kind. It proves that there exists another economy with perturbed short-sales constraints in which there is an allocation-equivalent equilibrium in which asset prices have a bubble. The second theorem extends to the result to the case in short-sales constraints are endogenously determined in the sense of Alvarez and Jermann [Efficiency, equilibrium, and asset pricing with risk of default, Econometrica 68 (2000) 775-797].
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by UCLA Department of Economics in its series Levine's Bibliography with number 122247000000000905.
Date of creation: 08 Feb 2006
Date of revision:
Contact details of provider:
Web page: http://www.dklevine.com/
Other versions of this item:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kiyotaki, Nobuhiro & Moore, John, 1997.
Journal of Political Economy,
University of Chicago Press, vol. 105(2), pages 211-48, April.
- John Moore & Nobuhiro Kiyotaki, . "Credit Cycles," Discussion Papers 1995-5, Edinburgh School of Economics, University of Edinburgh.
- Ryo Kato, 2003. "Matlab code for Kiyotaki-Moore credit cycles," QM&RBC Codes 113, Quantitative Macroeconomics & Real Business Cycles.
- Nobuhiro Kiyotaki & John Moore, 1995. "Credit Cycles," NBER Working Papers 5083, National Bureau of Economic Research, Inc.
- Manuel S. Santos & Michael Woodford, 1997.
"Rational Asset Pricing Bubbles,"
Econometric Society, vol. 65(1), pages 19-58, January.
- Fernando Alvarez & Urban J. Jermann, 2000. "Efficiency, Equilibrium, and Asset Pricing with Risk of Default," Econometrica, Econometric Society, vol. 68(4), pages 775-798, July.
- Timothy J Kehoe & David K Levine, 1993.
"Debt Constrained Asset Markets,"
Levine's Working Paper Archive
1276, David K. Levine.
- YiLi Chien & Hanno Lustig, 2010.
"The Market Price of Aggregate Risk and the Wealth Distribution,"
Review of Financial Studies,
Society for Financial Studies, vol. 23(4), pages 1596-1650, April.
- Hanno Lustig, 2001. "The Market Price of Aggregate Risk and the Wealth Distribution," Finance 0111004, EconWPA, revised 16 Nov 2001.
- Hanno Lustig, 2004. "The Market Price of Aggregate Risk and the Wealth Distribution," UCLA Economics Online Papers 299, UCLA Department of Economics.
- Hanno Lustig & Yi-Li Chien, 2005. "The Market Price of Aggregate Risk and the Wealth Distribution," NBER Working Papers 11132, National Bureau of Economic Research, Inc.
- Diba, Behzad T. & Grossman, Herschel I., 1988.
"Rational inflationary bubbles,"
Journal of Monetary Economics,
Elsevier, vol. 21(1), pages 35-46, January.
- Tirole, Jean, 1985. "Asset Bubbles and Overlapping Generations," Econometrica, Econometric Society, vol. 53(6), pages 1499-1528, November.
- Gaetano Bloise & Pietro Reichlin & Mario Tirelli, 2009.
"Indeterminacy of competitive equilibrium with risk of default,"
Departmental Working Papers of Economics - University 'Roma Tre'
0109, Department of Economics - University Roma Tre.
- Gaetano Bloise & Pietro Reichlin & Mario Tirelli, 2009. "Indeterminacy Of Competitive Equilibrium With Risk Of Default," Levine's Working Paper Archive 814577000000000313, David K. Levine.
- Bloise, Gaetano & Reichlin, Pietro & Tirelli, Mario, 2009. "Indeterminacy of Competitive Equilibrium with Risk of Default," CEPR Discussion Papers 7477, C.E.P.R. Discussion Papers.
- Kocherlakota, Narayana & Wright, Randall, 2008. "Introduction to monetary and macro economics," Journal of Economic Theory, Elsevier, vol. 142(1), pages 1-4, September.
- Jürgen Eichberger & Klaus Rheinberger & Martin Summer, 2011.
"Credit Risk in General Equilibrium,"
172, Oesterreichische Nationalbank (Austrian Central Bank).
- Jürgen Eichberger & Klaus Rheinberger & Martin Summer, 2014. "Credit Risk in General Equilibrium," CESifo Working Paper Series 4602, CESifo Group Munich.
- Eichberger, Jürgen & Rheinberger, Klaus & Summer, Martin, 2012. "Credit risk in general equilibrium," Working Paper Series 1445, European Central Bank.
- Giglio, Stefano & Severo, Tiago, 2012.
"Intangible capital, relative asset shortages and bubbles,"
Journal of Monetary Economics,
Elsevier, vol. 59(3), pages 303-317.
- Stefano Giglio & Tiago Severo, 2011. "Intangible Capital, Relative Asset Shortages and Bubbles," Levine's Working Paper Archive 786969000000000121, David K. Levine.
- Stefano Giglio & Tiago Severo, 2011. "Intangible Capital, Relative Asset Shortages and Bubbles," IMF Working Papers 11/271, International Monetary Fund.
- Blommestein, Hans J. & Eijffinger, Sylvester C W & Qian, Zongxin, 2011. "A Dynamic General Equilibrium Analysis of Monetary Policy Rules, Adverse Selection and Long-Run Financial Risk," CEPR Discussion Papers 8652, C.E.P.R. Discussion Papers.
- Jianjun Miao & PENGFEI WANG, 2011.
"Sectoral Bubbles and Endogenous Growth,"
Boston University - Department of Economics - Working Papers Series
WP2011-032, Boston University - Department of Economics.
- Gaetano Bloise & Pietro Reichlin & Mario Tirelli, 2013. "Fragility of Competitive Equilibrium with Risk of Default," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(2), pages 271-295, April.
- Narayana R. Kocherlakota, 2007.
"Money and bonds: an equivalence theorem,"
393, Federal Reserve Bank of Minneapolis.
- Blommestein, H.J. & Eijffinger, S.C.W. & Qian, Z., 2011. "Monetary Policy Rules, Adverse Selection and Long-Run Financial Risk," Discussion Paper 2011-121, Tilburg University, Center for Economic Research.
- Jan Werner, 2012. "Rational Asset Pricing Bubbles Revisited," 2012 Meeting Papers 1165, Society for Economic Dynamics.
- Araujo, Aloisio & Novinski, Rodrigo & Páscoa, Mário R., 2011. "General equilibrium, wariness and efficient bubbles," Journal of Economic Theory, Elsevier, vol. 146(3), pages 785-811, May.
- Bejan, Camelia & Bidian, Florin, 2010. "Limited enforcement, bubbles and trading in incomplete markets," MPRA Paper 36819, University Library of Munich, Germany, revised 20 Feb 2012.
- Kunieda, Takuma, 2008. "Asset bubbles and borrowing constraints," Journal of Mathematical Economics, Elsevier, vol. 44(2), pages 112-131, January.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (David K. Levine).
If references are entirely missing, you can add them using this form.