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TitleCapital gains
Author(s)Conraria, Luís Aguiar
Shell, Karl
Capital gains
Heterogeneous capital
Irreversible investment
Overlapping generations
Tobin's q
Issue dateSep-2006
JournalInternational Journal of Economic Theory
Citation"International Journal of Economic Theory". ISSN 1742-7355. 2:3-4 (Sep. 2006) 331-349.
Abstract(s)We analyze a simple overlapping-generations model with two capital goods. The dynamical system is defined by savings behavior and short-run perfect-foresight asset-market clearing. Because lifetimes are finite, there is no transversality condition. If there is a bubble in asset pricing, it will burst in finite time: expectations will eventually be frustrated, but this might take several generations. This raises the question of whether (infinite) long-run perfect foresight is a reasonable assumption for overlapping-generations economies and, hence, whether bursting bubbles can occur in equilibrium.
Publisher version
AccessOpen access
Appears in Collections:NIPE - Artigos em Revistas de Circulação Internacional com Arbitragem Científica

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