Dividend paying assets, the unit root property, and suboptimality

Subir Chattopadhyay and Antonio Jimnez-Martnez
Authors registered in the RePEc Author Service: Antonio Jimenez-Martinez

Journal of Mathematical Economics, 2009, vol. 45, issue 3-4, 223-232

Abstract: We consider the stationary equilibria of one good overlapping generations (OLG) economies with a sequence of possibly incomplete asset markets and prove two results. First, we show that if some asset always pays a nonnegative dividend, then its price changes sign across states if and only if the Perron root of every agent's matrix of intertemporal rates of substitution exceeds one. Second, we provide sufficient conditions in terms of dividends and asset prices such that, keeping asset prices fixed, a conditionally Pareto improving allocation is induced by a stationary reassignment of a single asset. When taken together the results show that when for some agent the Perron root exceeds one, the existence of an asset that pays a strictly positive dividend in every state is sufficient to induce an improvement.

Keywords: Stochastic; OLG; Stationary; equilibrium; Dividend; paying; assets; Optimality; Unit; root; property (search for similar items in EconPapers)
Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:eee:mateco:v:45:y:2009:i:3-4:p:223-232

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