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On existence, effciency and bubbles of Ramsey equilibrium with borrowing constraints

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  • Robert Becker

    (Department of Economics, 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 address the fundamental issues of existence and efficiency of an equilibrium in a Ramsey model with many agents, where agents have heterogenous discounting, elastic labor supply and face borrowing constraints. The existence of rational bubbles is also tackled. In the first part, we prove the equilibrium existence in a truncated bounded economy through a fixed-point argument by Gale and Mas-Colell (1975). This equilibrium is also an equilibrium of any unbounded economy with the same fundamentals. The proof of existence is eventually given for an infinitehorizon economy as a limit of a sequence of truncated economies. Our general approach is suitable for applications to other models with different market imperfections. In the second part, we show the impossibility of bubbles in a productive economy and we give sufficient conditions for equilibrium efficiency.

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Bibliographic Info

Paper provided by Development and Policies Research Center (DEPOCEN), Vietnam in its series Working Papers with number 15.

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Length: 36 pages
Date of creation: 2013
Date of revision:
Handle: RePEc:dpc:wpaper:1513

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  7. Robert Becker & Ram Sewak Dubey & Tapan Mitra, 2012. "On Ramsey Equilibrium: Capital Ownership Pattern and Inefficiency," Caepr Working Papers, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington 2012-007, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington.
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Cited by:
  1. 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.
  2. repec:ipg:wpaper:4 is not listed on IDEAS
  3. Kazuo Nishimura & Carine Nourry & Thomas Seegmuller & Alain Venditti, 2013. "Public Spending as a Source of Endogenous Business Cycles in a Ramsey Model with Many Agents," Working Papers, HAL halshs-00796698, HAL.
  4. Robert Becker & Ram Sewak Dubey & Tapan Mitra, 2012. "On Ramsey Equilibrium: Capital Ownership Pattern and Inefficiency," Caepr Working Papers, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington 2012-007, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington.

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