Existence of bubbly equilibria in overlapping generations models with stochastic production

The paper develops a dynamical systems approach to study asset bubbles in OLG economies with stochastic production. We derive necessary and sufficient conditions for bubbly equilibria to exist and chracterize the maximum sustainable bubble. Even if they exist, bubbles are temporary and the economy converges to a bubbleless equilibrium with probability one. We also demonstrate that the existence conditions can be relaxed if frictions such as borrowing constraints are introduced.

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Year of publication:	2014
Authors:	Hillebrand, Marten
Institutions:	Fakultät für Wirtschaftswissenschaften, Karlsruhe Institut für Technologie
Subject:	asset bubbles \| OLG \| stochastic production \| capital accumulation \| dynamical systems \| borrowing constraints

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Extent:	application/pdf
Series:	Working Paper Series in Economics. - ISSN 2190-9806.
Type of publication:	Book / Working Paper
Notes:	Number 57
Classification:	C61 - Optimization Techniques; Programming Models; Dynamic Analysis ; C62 - Existence and Stability Conditions of Equilibrium ; E23 - Production
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10010954936