A Simple No-Bubble Theorem

Takashi Kamihigashi

No DP2015-03, Discussion Paper Series from Research Institute for Economics & Business Administration, Kobe University

Abstract: This paper establishes a simple no-bubble theorem that applies to a wide range of deterministic models with in nitely lived consumers. Our model assumes only a sequential budget constraint and strictly monotone preferences. In this general setup, we show that asset bubbles are impossible if a consumer can reduce his asset holdings permanently. This is a substantial generalization of the result of Kocherlakota (1992) on asset bubbles and short-sales constraints.

Pages: 17 pages
Date: 2015-01
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Citations: View citations in EconPapers (3)

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