Capital price bubbles and dynamic inefficiency
Gerhard Sorger ()
Vienna Economics Papers from University of Vienna, Department of Economics
We demonstrate that the price of physical capital in standard neoclassical one-sector growth models can exceed its fundamental value, that is, a capital price bubble can exist. It is furthermore shown that the existence of a capital price bubble is in general unrelated to the dynamic ine?ciency of equilibrium. We illustrate these results in the contexts of the Ramsey-Cass-Koopmans model with ?nitely many in?nitely-lived dynasties of households, the Blanchard-Yaari model with in?nitely many overlapping generations of ?nitely-lived households, and the Solow-Swan model without microfoundation. Our ?ndings are in contrast to those derived by Tirole  and they are complementary to those from Kocherlakota  and Tirole .
JEL-codes: O41 G10 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:vie:viennp:1802
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