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Bubbles in Prices of Exhaustible Resources

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  • Boyan Jovanovic

    (NYU)

Abstract

Aside from the equilibrium that Hotelling (1931) displayed, his model of non-renewable resources also contains a continuum of bubble equilibria. In all the equilibria the price of the resource rises at the rate of interest. In a bubble equilibrium, however, the consumption of the resource peters out, and a positive fraction of the original stock continues to be traded forever. And that may well be happening in the market for high-end Bordeaux wines.

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Bibliographic Info

Paper provided by Society for Economic Dynamics in its series 2008 Meeting Papers with number 26.

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Date of creation: 2008
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Handle: RePEc:red:sed008:26

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  1. Champ,Bruce & Freeman,Scott & Haslag,Joseph, 2011. "Modeling Monetary Economies," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9781107003491.
  2. Benjamin J. Burton & Joyce P. Jacobsen, 1999. "Measuring Returns on Investments in Collectibles," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 13(4), pages 193-212, Fall.
  3. Dasgupta,P. S. & Heal,G. M., 1985. "Economic Theory and Exhaustible Resources," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521297615.
  4. Thomas J. Sargent & Neil Wallace, 1983. "A model of commodity money," Staff Report, Federal Reserve Bank of Minneapolis 85, Federal Reserve Bank of Minneapolis.
  5. Deaton, A. & Laroque, G., 1989. "On The Behavior Of Commodity Prices," Papers, Princeton, Woodrow Wilson School - Public and International Affairs 145, Princeton, Woodrow Wilson School - Public and International Affairs.
  6. Timmermann, Allan, 1994. "Present value models with feedback : Solutions, stability, bubbles, and some empirical evidence," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 18(6), pages 1093-1119, November.
  7. Kathryn Graddy & Orley Ashenfelter, 2002. "Auctions and the Price of Art," Economics Series Working Papers, University of Oxford, Department of Economics 131, University of Oxford, Department of Economics.
  8. Tirole, Jean, 1985. "Asset Bubbles and Overlapping Generations," Econometrica, Econometric Society, Econometric Society, vol. 53(6), pages 1499-1528, November.
  9. Manuel S. Santos & Michael Woodford, 1993. "Rational Asset Pricing Bubbles," Working Papers, Centro de Investigacion Economica, ITAM 9304, Centro de Investigacion Economica, ITAM.
  10. Stephen F. Le Roy, 2004. "Rational Exuberance," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 42(3), pages 783-804, September.
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Cited by:
  1. Spaenjers, C., 2011. "Essays in alternative investments," Open Access publications from Tilburg University, Tilburg University urn:nbn:nl:ui:12-4944288, Tilburg University.
  2. Dimson, E. & Spaenjers, C., 2009. "Ex-Post: The Investment Performance of Collectible Stamps," Discussion Paper, Tilburg University, Center for Economic Research 2009-64, Tilburg University, Center for Economic Research.
  3. Jie Zheng, 2008. "Strong Bubbles and Common Expected Bubbles in a Finite Horizon Model," Levine's Working Paper Archive 814577000000000038, David K. Levine.
  4. Gourinchas, Pierre-Oliver & Farhi, Emmanuel & Caballero, Ricardo J., 2008. "Financial Crash, Commodity Prices, and Global Imbalances," Scholarly Articles 3229095, Harvard University Department of Economics.
  5. Roberto Piazza, . "Growth and Crisis, Unavoidable Connection?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, Elsevier for the Society for Economic Dynamics.
  6. Rolf Golombek & Alfonso A. Irarrazabal & Lin Ma, 2013. "OPEC's Market Power: An Empirical Dominant Firm Model for the Oil Market," CESifo Working Paper Series, CESifo Group Munich 4512, CESifo Group Munich.
  7. repec:van:wpaper:vuecon-sub-12-00019 is not listed on IDEAS
  8. Benjamin Eden, 2011. "Living with a Monetary System infected by Bubbles," Vanderbilt University Department of Economics Working Papers, Vanderbilt University Department of Economics 1119, Vanderbilt University Department of Economics.
  9. Ing-Haw Cheng & Wei Xiong, 2013. "The Financialization of Commodity Markets," NBER Working Papers 19642, National Bureau of Economic Research, Inc.
  10. Dimson, Elroy & Rousseau, Peter L. & Spaenjers, Christophe, 2013. "The Price of Wine," Working Papers, American Association of Wine Economists 164656, American Association of Wine Economists.
  11. Ormos, Mihály & Erdős, Péter, 2011. "Borok mint alternatív befektetési lehetőségek
    [Wines as an alternative investment]
    ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(2), pages 158-172.
  12. James D. Hamilton, 2008. "Understanding Crude Oil Prices," NBER Working Papers 14492, National Bureau of Economic Research, Inc.
  13. Benjamin Eden, 2012. "Does a low interest rate support private bubbles?," Vanderbilt University Department of Economics Working Papers, Vanderbilt University Department of Economics 12-00010, Vanderbilt University Department of Economics.
  14. Strand, Jon, 2010. "Optimal fossil-fuel taxation with backstop technologies and tenure risk," Energy Economics, Elsevier, Elsevier, vol. 32(2), pages 418-422, March.
  15. Arce, Oscar & López-Salido, J David, 2008. "Housing Bubbles," CEPR Discussion Papers, C.E.P.R. Discussion Papers 6932, C.E.P.R. Discussion Papers.

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