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Equilibrium asset prices and bubbles in a continuous time OLG model

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Author Info
Brito, Paulo

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Abstract

In a Yaari-Blanchard overlapping generations endowment economy, and drawing on the equivalence between Radner (R) and Arrow-Debreu (AD) equi- libria, we prove that equilibrium AD prices have an explicit representation as a double integral equation. This allows for an analytic characterization of the relationship between life-cycle and cohort heterogeneity and asset prices. For a simple distribution, we prove that bubbles may exist, and derive conditions for ruling them out.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 10701.

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Date of creation: 22 Sep 2008
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Handle: RePEc:pra:mprapa:10701

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Related research
Keywords: overlapping generations; asset pricing; bubbles; integral equations; LambertW function;

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Find related papers by JEL classification:
G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies

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  1. John Geanakoplos, 2008. "Overlapping Generations Models of General Equilibrium," Levine's Bibliography 122247000000002225, UCLA Department of Economics. [Downloadable!]
  2. David Cass & Menahem E. Yaari, 1965. "Individual Saving, Aggregate Capital Accumulation, and Efficient Growth," Cowles Foundation Discussion Papers 198, Cowles Foundation, Yale University. [Downloadable!]
  3. John Geanakoplos, 2008. "Overlapping Generations Models of General Equilibrium," Cowles Foundation Discussion Papers 1663, Cowles Foundation, Yale University. [Downloadable!]
  4. Geanakoplos, John D. & Polemarchakis, Heraklis M., 1991. "Overlapping generations," Handbook of Mathematical Economics, in: W. Hildenbrand & H. Sonnenschein (ed.), Handbook of Mathematical Economics, edition 1, volume 4, chapter 35, pages 1899-1960 Elsevier. [Downloadable!] (restricted)
  5. Shell, Karl, 1971. "Notes on the Economics of Infinity," Journal of Political Economy, University of Chicago Press, vol. 79(5), pages 1002-11, Sept.-Oct. [Downloadable!] (restricted)
  6. Blanchard, Olivier J, 1985. "Debt, Deficits, and Finite Horizons," Journal of Political Economy, University of Chicago Press, vol. 93(2), pages 223-47, April. [Downloadable!] (restricted)
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  7. Brito, Paulo & Dilao, Rui, 2006. "Equilibrium price dynamics in an overlapping-generations exchange economy," MPRA Paper 699, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  8. S. Demichelis & H. Polemarchakis, 2007. "The determinacy of equilibrium in economies of overlapping generations," Economic Theory, Springer, vol. 32(3), pages 461-475, September. [Downloadable!] (restricted)
  9. Geanakoplos, J. & Polemarchakis, H., 1991. "Overlapping generations," CORE Discussion Papers 1991031, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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