Temporary bubbles.

DOI10.1016/S0022-0531(03)00063-2MaRDI QIDQ1411038zbMATH OpenOpenAlexFDO

Authors Bertrand Wigniolle, Philippe Michel

Publication date 15 October 2003

Published in Journal of Economic Theory (Search for Journal in Brave)

Full work available at URL https://doi.org/10.1016/s0022-0531(03)00063-2

zbMATH Keywords

bubblesmathematical model of monetary phenomenaoverlapping generations model

Mathematics Subject Classification ID

Dynamical systems in optimization and economics (37N40) Special types of economic equilibria (91B52) Special types of economic markets (including Cournot, Bertrand) (91B54)

Review text

The paper is devoted to the analysis of monetary phenomena. The problem is studied in the form of an overlapping generations model with capital accumulation. It is supposed that the agents live two periods. Budget and cash-in-advance constraints are formulated. Two basic cases are examined: the liquidity constraint is binding (Hahn and Solow's regime named HS) or not for the generation. In the HS-regime the existence of an intertemporal equilibrium under some conditions is proved. In the second case, it is proved that there exists an intertemporal equilibrium and the corresponding dynamics of the variable \(k_t=K_t/N_t,\) where \(K_t\) is the capital stock and \(N_t\) being a number of young agents, monotonically converges towards the golden rule. The question, whether an economy can switch from one regime to another along an equilibrium trajectory, is investigated. It is stated that money can periodically support bubbles, but the bubbles are temporary. Different types of equilibria may exist.

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Cites work

• Asset Bubbles and Overlapping Generations
• Capital market imperfections in a monetary growth model
• Financial market frictions, monetary policy, and capital accumulation in a small open economy
• Monetary, Fiscal, and Reserve Requirement Policy in a Simple Monetary Growth Model
• Money, banks and endogenous volatility
• The Effects of Open Market Operations in a Model of Intermediation and Growth

Cited in

(8)

• Financial bubbles and capital accumulation in altruistic economies
• Bubbly Markov equilibria
• Heterogeneity, monetary policy, Mirrleesian taxes, and the Friedman rule
• Asset bubbles and borrowing constraints
• Rational bubbles and macroeconomic fluctuations: the (de-)stabilizing role of monetary policy
• CASH-IN-ADVANCE CONSTRAINTS, BUBBLES, AND MONETARY POLICY
• Rational housing demand bubble
• On rational exuberance

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