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On existence, effciency and bubbles of Ramsey equilibrium with borrowing constraints

Listed author(s):
  • Robert Becker

    ()

    (Department of Economics, Indiana University)

  • Stefano Bosi

    ()

    (EPEE, University of Evry)

  • Cuong Le Van

    ()

    (CES, CNRS, VCREME and Hanoi WRU)

  • Thomas Seegmuller

    ()

    (Aix-Marseille University (Aix-Marseille School of Economics), CNRS and EHESS)

We address the fundamental issues of existence and efficiency of an equilibrium in a Ramsey model with many agents, where agents have heterogenous discounting, elastic labor supply and face borrowing constraints. The existence of rational bubbles is also tackled. In the first part, we prove the equilibrium existence in a truncated bounded economy through a fixed-point argument by Gale and Mas-Colell (1975). This equilibrium is also an equilibrium of any unbounded economy with the same fundamentals. The proof of existence is eventually given for an infinitehorizon economy as a limit of a sequence of truncated economies. Our general approach is suitable for applications to other models with different market imperfections. In the second part, we show the impossibility of bubbles in a productive economy and we give sufficient conditions for equilibrium efficiency.

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Paper provided by Development and Policies Research Center (DEPOCEN), Vietnam in its series Working Papers with number 15.

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Length: 36 pages
Date of creation: 2013
Handle: RePEc:dpc:wpaper:1513
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