[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/upd/utppwp/045.html
   My bibliography  Save this paper

Rational Bubble on Interest-Bearing Assets

Author

Listed:
  • Hajime Tomura

    (Graduate School of Economics, University of Tokyo)

Abstract
This paper compares fiat money and a Lucas' tree in an overlap- ping generations model. A Lucas' tree with a positive dividend has a unique competitive equilibrium price. Moreover, the price converges to the monetary equilibrium value of fiat money as the dividend goes to zero in the limit. Thus, the value of liquidity represented by a ra- tional bubble is part of the fundamental price of a standard interest- bearing asset. A Lucas' tree has multiple equilibrium prices if the dividend vanishes permanently with some probability. This case may be applicable to public debt, but not to stock or urban real estate.

Suggested Citation

  • Hajime Tomura, 2015. "Rational Bubble on Interest-Bearing Assets," UTokyo Price Project Working Paper Series 045, University of Tokyo, Graduate School of Economics.
    • Handle: RePEc:upd:utppwp:045
    as

    Download full text from publisher

    File URL: http://www.price.e.u-tokyo.ac.jp/img/researchdata/pdf/p_wp063.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Kocherlakota, Narayana, 2008. "Injecting rational bubbles," Journal of Economic Theory, Elsevier, vol. 142(1), pages 218-232, September.
    2. Woodford, Michael, 1995. "Price-level determinacy without control of a monetary aggregate," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 43(1), pages 1-46, December.
    3. Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, vol. 66(6), pages 467-467.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Elmendorf, Douglas W. & Gregory Mankiw, N., 1999. "Government debt," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 25, pages 1615-1669, Elsevier.
    2. Enders, Zeno & Hakenes, Hendrik Hakenes, 2014. "On the Existence and Prevention of Speculative Bubbles," Working Papers 0567, University of Heidelberg, Department of Economics.
    3. Tomohiro Hirano & Ryo Jinnai & Alexis Akira Toda, 2022. "Leverage, Endogenous Unbalanced Growth, and Asset Price Bubbles," Papers 2211.13100, arXiv.org, revised Feb 2024.
    4. Jia Pengfei & Lim King Yoong, 2021. "Tax Policy and Toxic Housing Bubbles in China," The B.E. Journal of Macroeconomics, De Gruyter, vol. 21(1), pages 151-183, January.
    5. Willem H. Buiter, 2003. "Helicopter Money: Irredeemable Fiat Money and the Liquidity Trap," NBER Working Papers 10163, National Bureau of Economic Research, Inc.
    6. Miao, Jianjun, 2014. "Introduction to economic theory of bubbles," Journal of Mathematical Economics, Elsevier, vol. 53(C), pages 130-136.
    7. Roger E.A. Farmer, 2019. "The Indeterminacy School in Macroeconomics," NBER Working Papers 25879, National Bureau of Economic Research, Inc.
    8. Dong, Feng & Xu, Zhiwei, 2022. "Bubbly bailout," Journal of Economic Theory, Elsevier, vol. 202(C).
    9. Michau, Jean-Baptiste & Ono, Yoshiyasu & Schlegl, Matthias, 2023. "Wealth preference and rational bubbles," European Economic Review, Elsevier, vol. 156(C).
    10. Clain-Chamosset-Yvrard, Lise & Seegmuller, Thomas, 2015. "Rational bubbles and macroeconomic fluctuations: The (de-)stabilizing role of monetary policy," Mathematical Social Sciences, Elsevier, vol. 75(C), pages 1-15.
    11. Jianjun Miao & PENGFEI WANG, 2011. "Sectoral Bubbles and Endogenous Growth," Boston University - Department of Economics - Working Papers Series WP2011-032, Boston University - Department of Economics.
    12. Roger E A Farmer, 2019. "The Indeterminacy Agenda in Macroeconomics," National Institute of Economic and Social Research (NIESR) Discussion Papers 507, National Institute of Economic and Social Research.
    13. Sweder van Wijnbergen & Stan Olijslagers & Nander de Vette, 2020. "Debt sustainability when r - g smaller than 0: no free lunch after all," Tinbergen Institute Discussion Papers 20-079/VI, Tinbergen Institute.
    14. Kunieda, Takuma, 2008. "Asset bubbles and borrowing constraints," Journal of Mathematical Economics, Elsevier, vol. 44(2), pages 112-131, January.
    15. George-Marios Angeletos & Chen Lian, 2021. "Determinacy without the Taylor Principle," NBER Working Papers 28881, National Bureau of Economic Research, Inc.
    16. Goetz von Peter, 2004. "Asset Prices and Banking Distress: A Macroeconomic Approach," Finance 0411034, University Library of Munich, Germany.
    17. Takashi Kamihigashi & Ryonghun Im, 2022. "Two Types of Asset Bubbles in a Small Open Economy," Discussion Paper Series DP2022-15, Research Institute for Economics & Business Administration, Kobe University.
    18. Philip Arestis & Alexander Mihailov, 2011. "Classifying Monetary Economics: Fields And Methods From Past To Future," Journal of Economic Surveys, Wiley Blackwell, vol. 25(4), pages 769-800, September.
    19. Norman, Thomas W.L., 2020. "The evolution of monetary equilibrium," Games and Economic Behavior, Elsevier, vol. 122(C), pages 233-239.
    20. Miao, Jianjun & Wang, Pengfei, 2014. "Sectoral bubbles, misallocation, and endogenous growth," Journal of Mathematical Economics, Elsevier, vol. 53(C), pages 153-163.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:upd:utppwp:045. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Yayoi Hatano (email available below). General contact details of provider: https://edirc.repec.org/data/fetokjp.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.