Intertemporal equilibrium with financial asset and physical capital

Cuong Le Van and Ngoc Sang Pham
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Cuong Le Van: IPAG Business School, CNRS, Paris School of Economics
Ngoc Sang Pham: University Paris I Pantheon-Sorbonne

No 170, Working Papers from Development and Policies Research Center (DEPOCEN), Vietnam

Abstract: We build an infinite-horizon dynamic deterministic general equilibrium model with imperfect market (borrowing constraint) in which heterogenous agents invest in capital or financial asset, work and consume, a representative firm maximizes profit. Firstly, the existence of intertemporal equilibrium is proved even if aggregate capital is not uniformly bounded. Secondly, we define and study financial bubble and physical bubble. Both financial and physical bubbles may occur but they can not occur at the same time. Lastly, we study impact of physical productivity and financial dividend on the physical market which we call "the race between productivity and dividend".

Keywords: Financial asset bubble; capital asset bubble; intertemporal equilibrium; productivity; infinite horizon (search for similar items in EconPapers)
Pages: 39 pages
Date: 2014
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Published in Economic Theory, 2016, 62(1-2), pages 155-199.

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https://doi.org/10.1007/s00199-015-0881-z Published version, 2016

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Persistent link: https://EconPapers.repec.org/RePEc:dpc:wpaper:0214

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