Confidence and the Real Value of Money in an Overlapping Generation Economy

Philippe Weil

Post-Print from HAL

Abstract: We demonstrate that stochastic bubbles which have a constant, exogenous, probability of collapsing may exist, in general equilibrium, on an intrinsically useless and unbacked asset (money). This may happen provided that the probability q that the bubble will persist next period is large enough and exceeds a threshold level Q which we call the minimum rate of confidence. This condition is always violated when the economy without bubble is dynamically efficient. It is more likely to be satisfied, in dynamically inefficient economies, the larger the "size" of the inefficiency (as measured by the excess of the growth rate over the no-bubble interest rate). We study both exchange and production economies.

Date: 1987-02
References: Add references at CitEc
Citations: View citations in EconPapers (120)

Published in Quarterly Journal of Economics, 1987, 102 (1), pp.1 - 22

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Journal Article: Confidence and the Real Value of Money in an Overlapping Generations Economy (1987)
Working Paper: Confidence and the Real Value of Money in an Overlapping Generation Economy (1987)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03393234

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().