Bubbly Markov Equilibria
Martin Barbie () and
Marten Hillebrand ()
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Martin Barbie: University of Cologne
No 1703, Working Papers from Gutenberg School of Management and Economics, Johannes Gutenberg-Universität Mainz
Bubbly Markov Equilibria (BME) are recursive equilibria on the natural state space which admit a non-trivial bubble. The present paper studies the existence and properties of BME in a general class of overlapping generations (OLG) economies with capital accumulation and stochastic production shocks. Using monotone methods, we develop a general approach to construct Markov equilibria and provide necessary and sufficient conditions for these equilibria to be bubbly. Our main result shows that a BME exists whenever the bubbleless equilibrium is Pareto inefficient either due to overaccumulation of capital or inefficient risksharing between generations.
Keywords: Asset Bubbles; Stochastic OLG; Production; Markov Equilibria; Pareto Optimality. (search for similar items in EconPapers)
JEL-codes: C62 D51 E32 (search for similar items in EconPapers)
Pages: 50 pages
New Economics Papers: this item is included in nep-dge, nep-mac, nep-mic and nep-ore
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https://download.uni-mainz.de/RePEc/pdf/Discussion_Paper_1703.pdf First version, 2017 (application/pdf)
Journal Article: Bubbly Markov equilibria (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:jgu:wpaper:1703
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