Intertemporal equilibrium with production: bubbles and efficiency

Stefano Bosi (), Cuong Le van and Ngoc-Sang Pham
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Stefano Bosi: EPEE, University of Evry

No 14-09, Documents de recherche from Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne

Abstract: We consider a general equilibrium model with heterogeneous agents, borrowing constraints, and exogenous labor supply. First, the existence of intertemporal equilibrium is proved even if the aggregate capitals are not uniformly bounded above and the production functions are not time invariant. Second, we call by physical capital bubble a situation in which the fundamental value of physical capital is lower than its market price. We show that there is a physical capital bubble if and only if the sum (over time) of capital returns is finite. We also point out that there is no causal relationship between physical capital bubble and the fact that the present value of output is finite. Last, with linear technologies, every intertemporal equilibrium is efficient in sense of Malinvaud (1953). Moreover, there is a room for both efficiency and bubble.

Keywords: Intertemporal equilibrium; physical capital bubble; efficiency; infinite horizon (search for similar items in EconPapers)
JEL-codes: C62 D31 D91 G10 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2014
New Economics Papers: this item is included in nep-dge and nep-gro
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (26)

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Related works:
Working Paper: Intertemporal equilibrium with production: bubbles and efficiency (2014)
Working Paper: Intertemporal equilibrium with production: bubbles and efficiency (2014)
Working Paper: Intertemporal equilibrium with production: bubbles and efficiency (2014)
Working Paper: Intertemporal equilibrium with production: bubbles and efficiency (2014)
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