Real indeterminacy and dynamics of asset price bubbles in general equilibrium
Stefano Bosi
(University of Evry Paris-Saclay)
&
Cuong Le Van &
Ngoc-Sang Pham
(EM Normandie Business School)
We show that both real indeterminacy and asset price bubble may appear in an infinite-horizon exchange economy with infinitely lived agents and an imperfect financial market. We explain how the asset structure and heterogeneity (in terms of preferences and endowments) affect the existence and the dynamics of asset price bubbles as well as the equilibrium indeterminacy. Moreover, this paper bridges the literature on bubbles in models with infinitely lived agents and that in overlapping generations models.
