On Existence and Bubbles of Ramsey Equilibrium with Borrowing Constraints

Robert Becker, Stefano Bosi (), Cuong Le van and Thomas Seegmuller
Additional contact information
Stefano Bosi: EPEE, University of Evry.

No 1231, AMSE Working Papers from Aix-Marseille School of Economics, France

Abstract: We study the existence of equilibrium and rational bubbles in a Ramsey model with heterogeneous agents, borrowing constraints and endogenous labor. Applying a nonstandard fixed-point theorem by Gale and Mas-Colell’s (1975), we prove the existence of equilibrium in a time-truncated bounded economy. A common argument shows this solution to be an equilibrium for any unbounded economy with the same fundamentals. Taking the limit of a sequence of truncated economies, we eventually obtain the existence of equilibrium in the Ramsey model. In the second part of the paper, we address the issue of rational bubbles and we prove that they never occur in a productive economy à la Ramsey.

Keywords: Ramsey equilibrium; existence; efficiency; bubbles; heterogeneous; agents; endogenous labor supply; borrowing constraint. (search for similar items in EconPapers)
JEL-codes: C62 D21 D91 G10 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2012-11-11, Revised 2012-11-11
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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