Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/97642 
Year of Publication: 
2014
Series/Report no.: 
KIT Working Paper Series in Economics No. 57
Publisher: 
Karlsruher Institut für Technologie (KIT), Institut für Volkswirtschaftslehre (ECON), Karlsruhe
Abstract: 
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.
Subjects: 
asset bubbles
OLG
stochastic production
capital accumulation
dynamical systems
borrowing constraints
JEL: 
C61
C62
E23
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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