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Long-lived collateralized assets and bubbles

  • Aloisio Araujo
  • Mario Rui Pascoa
  • Juan Pablo Torres-Martinez

    ()

    (Department of Economics, PUC-Rio)

When infinite lived agents trade long-lived assets secured by durable goods, equilibrium exists without any uniform impatience requirements or additional debt constraints. Asset pricing bubbles are absent when the new endowments of durable goods are uniformly bounded away from zero. Otherwise, bubbles may occur, even for assets in persistently positive net supply and for deflators that yield finite present values of aggregate wealth.

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Paper provided by Department of Economics PUC-Rio (Brazil) in its series Textos para discussão with number 542.

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Length: 30p
Date of creation: Mar 2007
Date of revision:
Handle: RePEc:rio:texdis:542
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  1. Páscoa, Mario Rui & Araújo, Aloísio Pessoa de & Torres-Martínez, Juan Pablo, 2001. "Collateral Avoids Ponzi Schemes in Incomplete Markets," Economics Working Papers (Ensaios Economicos da EPGE) 419, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
  2. Eduardo L. Giménez, 2003. "Complete and incomplete markets with short-sale constraints," Economic Theory, Springer, vol. 21(1), pages 195-204, 01.
  3. Mário R. Páscoa & Myrian Petrassi & Juan Pablo Torres-Martínez, 2009. "Fiat Money and the Value of Binding Portfolio Constraints," Working Papers Series 176, Central Bank of Brazil, Research Department.
  4. Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, vol. 66, pages 467.
  5. Grandmont, Jean-Michel & Younes, Yves, 1972. "On the Role of Money and the Existence of a Monetary Equilibrium," Review of Economic Studies, Wiley Blackwell, vol. 39(3), pages 355-72, July.
  6. Felix Kubler & Karl Schmedders, 2001. "Stationary Equilibria in Asset-Pricing Models with Incomplete Markets and Collateral," Discussion Papers 1319, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  7. Mário Páscoa & Aloisio Araujo & José Fajardo, 2004. "Endogenous Collateral," Econometric Society 2004 Latin American Meetings 161, Econometric Society.
  8. Manuel S. Santos & Michael Woodford, 1993. "Rational Asset Pricing Bubbles," Working Papers 9304, Centro de Investigacion Economica, ITAM.
  9. Magill, Michael & Quinzii, Martine, 1996. "Incomplete markets over an infinite horizon: Long-lived securities and speculative bubbles," Journal of Mathematical Economics, Elsevier, vol. 26(1), pages 133-170.
  10. Gale, David, 1973. "Pure exchange equilibrium of dynamic economic models," Journal of Economic Theory, Elsevier, vol. 6(1), pages 12-36, February.
  11. Hernandez D., Alejandro & Santos, Manuel S., 1996. "Competitive Equilibria for Infinite-Horizon Economies with Incomplete Markets," Journal of Economic Theory, Elsevier, vol. 71(1), pages 102-130, October.
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