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A Simple No-Bubble Theorem for Deterministic Sequential Economies

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  • Takashi Kamihigashi

    (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan)

Abstract

We show a simple no-bubble theorem that applies to a wide range of deterministic sequential economies with infinitely lived agents. In particular, we show that asset bubbles never arise if there is at least one agent who can reduce his asset holdings permanently from some period onward. This is a substantial generalization of Kocherlakota's (1992, Journal of Economic Theory 57, 245--256) result on asset bubbles and short sales constraints. Our no-bubble theorem requires virtually no assumption except for the strict monotonicity of preferences.

Suggested Citation

  • Takashi Kamihigashi, 2015. "A Simple No-Bubble Theorem for Deterministic Sequential Economies," Discussion Paper Series DP2015-38, Research Institute for Economics & Business Administration, Kobe University.
    • Handle: RePEc:kob:dpaper:dp2015-38
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    File URL: https://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/DP2015-38.pdf
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    References listed on IDEAS

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    Cited by:

    1. Clain-Chamosset-Yvrard, Lise & Kamihigashi, Takashi, 2017. "International transmission of bubble crashes in a two-country overlapping generations model," Journal of Mathematical Economics, Elsevier, vol. 68(C), pages 115-126.
    2. Lise Clain-Chamosset-Yvrard & Takashi Kamihigashi, 2015. "International Transmission of Bubble Crashes in a Two-Country Overlapping Generations," Discussion Paper Series DP2015-43, Research Institute for Economics & Business Administration, Kobe University.

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