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On Existence and Bubbles of Ramsey Equilibrium with Borrowing Constraints

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Author Info

  • Robert Becker

    ()
    (Department of Economics, Indiana University - Indiana University)

  • Stefano Bosi

    ()
    (EPEE - Centre d'Etudes des Politiques Economiques - Université d'Evry-Val d'Essonne)

  • Cuong Le Van

    ()
    (Ipag Business School - Ipag Business School, VCREME - VanXuan Center of Research in Economics, Management and Environment - VanXuan Center of Research in Economics, Management and Environment, CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne)

  • Thomas Seegmuller

    ()
    (AMSE - Aix-Marseille School of Economics - Centre national de la recherche scientifique (CNRS) - École des Hautes Études en Sciences Sociales (EHESS) - Ecole Centrale Marseille (ECM))

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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Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00793530.

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Date of creation: Nov 2013
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Handle: RePEc:hal:cesptp:halshs-00793530

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Keywords: existence of equilibrium; bubbles; Ramsey model; heterogeneous agents; borrowing constraint; endogenous labor;

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  3. Tirole, Jean, 1982. "On the Possibility of Speculation under Rational Expectations," Econometrica, Econometric Society, vol. 50(5), pages 1163-81, September.
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Citations

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Cited by:
  1. Stefano Bosi & Cuong Le Van & Ngoc-Sang Pham, 2014. "Intertemporal equilibrium with production: bubbles and efficiency," Documents de travail du Centre d'Economie de la Sorbonne 14043, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
  2. Tsangyao Chang & Goodness C. Aye & Rangan Gupta, 2014. "Testing for Multiple Bubbles in the BRICS Stock Markets," Working Papers 2014-462, Department of Research, Ipag Business School.
  3. 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.
  4. Ngoc-Sang Pham, 2013. "Collateral monetary equilibrium with liquidity constraints in an infinite horizon economy," Documents de travail du Centre d'Economie de la Sorbonne 13055, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
  5. Frédéric Teulon, 2014. "Les bulles spéculatives et le marché de l’immobilier," Working Papers 2014-418, Department of Research, Ipag Business School.
  6. 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.
  7. Mehmet Balcilar & Kirsten Thompson & Rangan Gupta & Renee van Eyden, 2014. "Testing the Asymmetric Effects of Financial Conditions in South Africa: A Nonlinear Vector Autoregression Approach," Working Papers 2014-468, Department of Research, Ipag Business School.
  8. Stefano Bosi & Cuong Le Van & Ngoc-Sang Pham, 2014. "Intertemporal equilibrium with production: bubbles and efficiency," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-01020888, HAL.
  9. 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.

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