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Equilibrium asset prices and bubbles in a continuous time OLG model

  • Brito, Paulo

In a Yaari-Blanchard overlapping generations endowment economy, and drawing on the equivalence between Radner (R) and Arrow-Debreu (AD) equi- libria, we prove that equilibrium AD prices have an explicit representation as a double integral equation. This allows for an analytic characterization of the relationship between life-cycle and cohort heterogeneity and asset prices. For a simple distribution, we prove that bubbles may exist, and derive conditions for ruling them out.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 10701.

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Date of creation: 22 Sep 2008
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Handle: RePEc:pra:mprapa:10701
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  1. Paulo Brito & Rui Dilao, 2006. "Equilibrium price dynamics in an overlapping-generations exchange economy," Working Papers Department of Economics 2006/27, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
  2. Geanakoplos, John D. & Polemarchakis, Heraklis M., 1991. "Overlapping generations," Handbook of Mathematical Economics, in: W. Hildenbrand & H. Sonnenschein (ed.), Handbook of Mathematical Economics, edition 1, volume 4, chapter 35, pages 1899-1960 Elsevier.
  3. John Geanakoplos, 2008. "Overlapping Generations Models of General Equilibrium," Cowles Foundation Discussion Papers 1663, Cowles Foundation for Research in Economics, Yale University.
  4. Shell, Karl, 1971. "Notes on the Economics of Infinity," Journal of Political Economy, University of Chicago Press, vol. 79(5), pages 1002-11, Sept.-Oct.
  5. S. Demichelis & H. Polemarchakis, 2007. "The determinacy of equilibrium in economies of overlapping generations," Economic Theory, Springer, vol. 32(3), pages 461-475, September.
  6. Blanchard, Olivier J, 1985. "Debt, Deficits, and Finite Horizons," Journal of Political Economy, University of Chicago Press, vol. 93(2), pages 223-47, April.
  7. David Cass & Menahem E. Yaari, 1965. "Individual Saving, Aggregate Capital Accumulation, and Efficient Growth," Cowles Foundation Discussion Papers 198, Cowles Foundation for Research in Economics, Yale University.
  8. John Geanakoplos, 2008. "Overlapping Generations Models of General Equilibrium," Levine's Working Paper Archive 122247000000002225, David K. Levine.
  9. Geanakoplos, J. & Polemarchakis, H., 1991. "Overlapping generations," CORE Discussion Papers 1991031, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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