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Intertemporal equilibrium with production: bubbles and efficiency

Author

Listed:
  • Stefano Bosi

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

  • Cuong Le Van

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, IPAG Business School, VCREME - Van Xuan Center of Research in Economics, Management and Environment)

  • Ngoc-Sang Pham

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

Abstract

We consider a general equilibrium model with heterogeneous agents, borrowing constraints, and exogenous labor supply. First, the existence of intertemporal equilibrium is proved even if the aggregate capitals are not uniformly bounded above and the production functions are not time invariant. Second, (i) we call by physical capital bubble a situation in which the fundamental value of physical capital is lower than its price, (ii) we say that the interest rates are low if the sum of interest rates is finite. We show that physical capital bubble is equivalent to a situation with low interest rates. Last, we prove that with linear technologies, every intertemporal equilibrium is efficient. Moreover, there is a room for both efficiency and bubble.

Suggested Citation

  • 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.
    • Handle: RePEc:hal:cesptp:halshs-01020888
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-01020888
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    References listed on IDEAS

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    Cited by:

    1. Bosi, Stefano & Van, Cuong Le & Pham, Ngoc-Sang, 2018. "Intertemporal equilibrium with heterogeneous agents, endogenous dividends and collateral constraints," Journal of Mathematical Economics, Elsevier, vol. 76(C), pages 1-20.
    2. repec:ipg:wpaper:2014-560 is not listed on IDEAS
    3. repec:ipg:wpaper:2014-604 is not listed on IDEAS
    4. repec:ipg:wpaper:2014-511 is not listed on IDEAS
    5. Bosi, Stefano & Le Van, Cuong & Pham, Ngoc-Sang, 2017. "Asset bubbles and efficiency in a generalized two-sector model," Mathematical Social Sciences, Elsevier, vol. 88(C), pages 37-48.
    6. Cuong Le Van & Ngoc-Sang Pham, 2016. "Intertemporal equilibrium with financial asset and physical capital," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 62(1), pages 155-199, June.
    7. Takashi Kamihigashi, 2015. "A Simple No-Bubble Theorem for Deterministic Sequential Economies," Discussion Paper Series DP2015-38, Research Institute for Economics & Business Administration, Kobe University.
    8. Becker, Robert A. & Borissov, Kirill & Dubey, Ram Sewak, 2015. "Ramsey equilibrium with liberal borrowing," Journal of Mathematical Economics, Elsevier, vol. 61(C), pages 296-304.
    9. repec:ipg:wpaper:2014-556 is not listed on IDEAS
    10. Stefano Bosi & Cuong Le Van & Ngoc-Sang Pham, 2015. "Intertemporal equilibrium with heterogeneous agents, endogenous dividends and borrowing constraints," Documents de travail du Centre d'Economie de la Sorbonne 15067, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    11. Takashi Kamihigashi, 2016. "A Simple Optimality-Based No-Bubble Theorem for Deterministic Sequential Economies," Discussion Paper Series DP2016-22, Research Institute for Economics & Business Administration, Kobe University.
    12. repec:ipg:wpaper:2014-567 is not listed on IDEAS
    13. repec:ipg:wpaper:2014-462 is not listed on IDEAS
    14. Takashi Kamihigashi, 2015. "A Simple No-Bubble Theorem," Discussion Paper Series DP2015-03, Research Institute for Economics & Business Administration, Kobe University.
    15. Kamihigashi, Takashi, 2018. "A Simple optimality-based no-bubble theorem for deterministic sequential economies with strictly monotone preferences," Mathematical Social Sciences, Elsevier, vol. 91(C), pages 36-41.
    16. repec:ipg:wpaper:2014-468 is not listed on IDEAS
    17. repec:ipg:wpaper:2014-572 is not listed on IDEAS
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    19. repec:ipg:wpaper:2014-580 is not listed on IDEAS
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    21. Takashi Kamihigashi, 2015. "A Simple No-Bubble Theorem for Deterministic Dynamic Economies," Discussion Paper Series DP2015-24, Research Institute for Economics & Business Administration, Kobe University.
    22. Becker, Robert A. & Borissov, Kirill & Dubey, Ram Sewak, 2015. "Ramsey equilibrium with liberal borrowing," Journal of Mathematical Economics, Elsevier, vol. 61(C), pages 296-304.
    23. repec:ipg:wpaper:2014-457 is not listed on IDEAS
    24. repec:ipg:wpaper:2014-510 is not listed on IDEAS

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    More about this item

    Keywords

    intertemporal equilibrium; physical capital bubble; efficiency; infinite horizon; équilibre intertemporel avec production; bulle du capital physique; efficience; horizon infini;
    All these keywords.

    JEL classification:

    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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