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DOI: 10.5445/IR/1000041179

Existence of bubbly equilibria in overlapping generations models with stochastic production

Hillebrand, Marten

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 characterize 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 constrains are introduced.

Zugehörige Institution(en) am KIT Institut für Volkswirtschaftslehre (ECON)
Publikationstyp Forschungsbericht
Jahr 2014
Sprache Englisch
Identifikator ISSN: 2190-9806
URN: urn:nbn:de:swb:90-411790
KITopen ID: 1000041179
Verlag KIT, Karlsruhe
Serie Working paper series in economics ; 57
Schlagworte Asset bubbles, OLG, stochastic production, capital accumulation, dynamicalsystems, borrowing constraints
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