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Long-lived collateralized assets and bubbles

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Author Info

  • Aloisio Araujo
  • Mário R. Pascoa
  • Juan Pablo Torres-Martínez

Abstract

When infinite-lived agents trade long-lived assets secured by durable goods, equilibrium exists without any additional debt constraints or uniform impatience conditions on agents' characteristics. Also, price bubbles are absent when physical endowments are uniformly bounded away from zero.

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File URL: http://www.econ.uchile.cl/uploads/publicacion/8b10c30bcbb39d61b7ce56e282df19d77af146fc.pdf
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Bibliographic Info

Paper provided by University of Chile, Department of Economics in its series Working Papers with number wp314.

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Length: 28 pages
Date of creation: Jul 2010
Date of revision:
Handle: RePEc:udc:wpaper:wp314

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Web page: http://www.econ.uchile.cl/
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Keywords: Collateralized assets; Existence of equilibrium; Asset pricing bubbles.;

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References

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  1. Magill, Michael & Quinzii, Martine, 1996. "Incomplete markets over an infinite horizon: Long-lived securities and speculative bubbles," Journal of Mathematical Economics, Elsevier, vol. 26(1), pages 133-170.
  2. Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, vol. 66, pages 467.
  3. Felix Kubler & Karl Schmedders, 2001. "Stationary Equilibria in Asset-Pricing Models with Incomplete Markets and Collateral," Discussion Papers 1319, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  4. Aloisio Araujo & M�rio Rui P�scoa & Juan Pablo Torres-Mart�nez, 2002. "Collateral Avoids Ponzi Schemes in Incomplete Markets," Econometrica, Econometric Society, vol. 70(4), pages 1613-1638, July.
  5. Páscoa, Mario Rui & Araújo, Aloísio Pessoa de & Barbachan, José Fajardo, 2003. "Endogenous Collateral," Economics Working Papers (Ensaios Economicos da EPGE) 511, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
  6. Mário Páscoa & Myrian Petrassi & Juan Pablo Torres-Martínez, 2008. "Fiat money and the value of binding portfolio constraints," Working Papers wp283, University of Chile, Department of Economics.
  7. Hernandez D., Alejandro & Santos, Manuel S., 1996. "Competitive Equilibria for Infinite-Horizon Economies with Incomplete Markets," Journal of Economic Theory, Elsevier, vol. 71(1), pages 102-130, October.
  8. Eduardo L. Gim�nez, 2001. "Complete and Incomplete Markets with Short-Sale Constraints," Tinbergen Institute Discussion Papers 01-034/1, Tinbergen Institute.
  9. Gale, David, 1973. "Pure exchange equilibrium of dynamic economic models," Journal of Economic Theory, Elsevier, vol. 6(1), pages 12-36, February.
  10. Manuel S. Santos & Michael Woodford, 1993. "Rational Asset Pricing Bubbles," Working Papers 9304, Centro de Investigacion Economica, ITAM.
  11. Grandmont, Jean-Michel & Younes, Yves, 1972. "On the Role of Money and the Existence of a Monetary Equilibrium," Review of Economic Studies, Wiley Blackwell, vol. 39(3), pages 355-72, July.
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Citations

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Cited by:
  1. Iraola, Miguel & Torres-Martínez, Juan Pablo, 2013. "Liquidity Contractions, Incomplete Financial Participation and the Prevalence of Negative Equity Non-recourse Loans," MPRA Paper 46838, University Library of Munich, Germany.
  2. Miguel A. Iraola & Juan Pablo Torres-Martínez, 2012. "Liquidity Contractions and Prepayment Risk on Collateralized Asset Markets," Working Papers wp364, University of Chile, Department of Economics.
  3. Ferreira, Thiago Revil T. & Torres-Martínez, Juan Pablo, 2009. "The impossibility of effective enforcement mechanisms in collateralized credit markets," MPRA Paper 13781, University Library of Munich, Germany.

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