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The Modigliani-Miller Theorem In A Dynamic Economy

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  • TAKEKUMA, SHIN-ICHI

Abstract

A dynamic economy with markets of equities and bonds is considered. The rational expectations equilibrium is defined in an asset pricing model and a condition under which the Modigliani-Miller theorem holds is shown. In an aggregate model the existence of a rational expectations equilibrium is proved.

Suggested Citation

  • Takekuma, Shin-Ichi, 2010. "The Modigliani-Miller Theorem In A Dynamic Economy," Discussion Papers 2010-03, Graduate School of Economics, Hitotsubashi University.
  • Handle: RePEc:hit:econdp:2010-03
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    Keywords

    The Modigliani-Miller theorem; rational expectations; asset pricing;

    JEL classification:

    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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