On existence, efficiency 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
Cuong Le Van: CES, CNRS, VCREME and Hanoi WRU
Thomas Seegmuller: GREQAM, Aix-Marseille University

No 2012-001, CAEPR Working Papers from Center for Applied Economics and Policy Research, Department of Economics, Indiana University Bloomington

Abstract: We address the fundamental issues of existence and efficiency of a Ramsey equilibrium with heterogenous discounting, elastic labor supply and borrowing constraints. In the first part, we prove the equilibrium existence in a truncated bounded economy through a fixed-point argument by Gale and Mas-Colell (1975). This equilibrium is also an equilibrium of any unbounded economy with the same fundamentals. The proof of existence is eventually given for an infinite-horizon economy as a limit of a sequence of truncated economies. Our general approach is suitable for applications to other models with different market imperfections. In the second part, we show the impossibility of bubbles in a productive economy and we give sufficient conditions for equilibrium efficiency.

Pages: 42 pages
Date: 2012-02
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Citations: View citations in EconPapers (3)

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Related works:
Working Paper: On existence, effciency and bubbles of Ramsey equilibrium with borrowing constraints (2013)
Working Paper: On existence, efficiency and bubbles of Ramsey equilibrium with borrowing constraints (2013)
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