Speculative trade, asset prices and investment levels

Alvaro Sandroni*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

2 Scopus citations

Abstract

In this paper I consider a dynamically complete market model without intrinsic uncertainty. Agents' beliefs are different, but correct in the limit. Some agents are more patient than others. I show that infinitely often share prices are low and the economy stagnates. Also, infinitely often share prices are high and the economy grows. The changes from growth to stagnation and from stagnation to growth are not caused by exogenous shocks. They are caused by speculative trade among agents with different propensities to save and invest.

Original languageEnglish (US)
Pages (from-to)423-433
Number of pages11
JournalEconomic Theory
Volume21
Issue number2-3
DOIs
StatePublished - Mar 1 2003

Keywords

  • Economic fluctuations
  • Speculative trade

ASJC Scopus subject areas

  • Economics and Econometrics

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