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Real indeterminacy and dynamics of asset price bubbles in general equilibrium

Author

Listed:
  • Pham, Ngoc-Sang
  • Le Van, Cuong
  • Bosi, Stefano

Abstract

In a simple infinite-horizon exchange economy with a single consumption good and a financial asset, real indeterminacy and asset price bubble may arise. We show how heterogeneity (in terms of preferences, endowments) and short-sale constraints affect the emergence and the dynamics of asset price bubbles as well as the equilibrium indeterminacy. We also bridge the literature of bubbles in models with infinitely lived agents and that in OLG models.

Suggested Citation

  • Pham, Ngoc-Sang & Le Van, Cuong & Bosi, Stefano, 2019. "Real indeterminacy and dynamics of asset price bubbles in general equilibrium," MPRA Paper 96834, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:96834
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    File URL: https://mpra.ub.uni-muenchen.de/96834/1/MPRA_paper_96834.pdf
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    More about this item

    Keywords

    asset price bubble; real indeterminacy; borrowing constraint; intertemporal equilibrium; infinite horizon;

    JEL classification:

    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • D9 - Microeconomics - - Micro-Based Behavioral Economics
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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