Does stock market investment matter for local indeterminacy?

Detalhes bibliográficos
Autor(a) principal: Cunha, João B.
Data de Publicação: 2012
Tipo de documento: Dissertação
Idioma: eng
Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
Texto Completo: http://hdl.handle.net/10400.14/12940
Resumo: The purpose of this paper is to study the influence of stock market investment on the local dynamics of a standard overlapping generations (OLG) economy with capital accumulation. In particular, we focus on the emergence of local bifurcations and expectations-driven fluctuations in an economy with endogenous profits. We consider an OLG model with future consumption, decreasing returns to scale in production, and investment in both physical capital and firms’ shares. We analyze the local dynamics of our model in terms of relevant parameters, namely, the capital share of output, the elasticity of capital-labour substitution, and the degree of returns to scale. We conclude that the steady state is never a sink, and thus indeterminacy does not emerge (and hence does not hold as a possible explanation for the excess volatility puzzle at an aggregate level). The steady state is either a saddle or a source and undergoes a transcriptical bifurcation for values of the capital share of output sufficiently high. Finally, we compare steady state welfare with and without a secondary stock market. We conclude that the introduction of a secondary market for shares may correct the dynamic inefficiency that arises in a simple OLG model, improving steady state welfare when the capital share of output is sufficiently low (i.e. under strong dynamic inefficiency).
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spelling Does stock market investment matter for local indeterminacy?IndeterminacyLocal dynamicsSecondary stock marketDecreasing returns to scaleEndogenous profitsDynamic inefficiencySteady state welfareDomínio/Área Científica::Ciências Sociais::Economia e GestãoThe purpose of this paper is to study the influence of stock market investment on the local dynamics of a standard overlapping generations (OLG) economy with capital accumulation. In particular, we focus on the emergence of local bifurcations and expectations-driven fluctuations in an economy with endogenous profits. We consider an OLG model with future consumption, decreasing returns to scale in production, and investment in both physical capital and firms’ shares. We analyze the local dynamics of our model in terms of relevant parameters, namely, the capital share of output, the elasticity of capital-labour substitution, and the degree of returns to scale. We conclude that the steady state is never a sink, and thus indeterminacy does not emerge (and hence does not hold as a possible explanation for the excess volatility puzzle at an aggregate level). The steady state is either a saddle or a source and undergoes a transcriptical bifurcation for values of the capital share of output sufficiently high. Finally, we compare steady state welfare with and without a secondary stock market. We conclude that the introduction of a secondary market for shares may correct the dynamic inefficiency that arises in a simple OLG model, improving steady state welfare when the capital share of output is sufficiently low (i.e. under strong dynamic inefficiency).Modesto, LeonorBraga, Teresa LloydVeritati - Repositório Institucional da Universidade Católica PortuguesaCunha, João B.2013-10-11T09:56:20Z2012-09-3020122012-09-30T00:00:00Zinfo:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/masterThesisapplication/pdfhttp://hdl.handle.net/10400.14/12940enginfo:eu-repo/semantics/openAccessreponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãoinstacron:RCAAP2023-09-05T01:36:33Zoai:repositorio.ucp.pt:10400.14/12940Portal AgregadorONGhttps://www.rcaap.pt/oai/openaireopendoar:71602024-03-19T18:10:23.320270Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãofalse
dc.title.none.fl_str_mv Does stock market investment matter for local indeterminacy?
title Does stock market investment matter for local indeterminacy?
spellingShingle Does stock market investment matter for local indeterminacy?
Cunha, João B.
Indeterminacy
Local dynamics
Secondary stock market
Decreasing returns to scale
Endogenous profits
Dynamic inefficiency
Steady state welfare
Domínio/Área Científica::Ciências Sociais::Economia e Gestão
title_short Does stock market investment matter for local indeterminacy?
title_full Does stock market investment matter for local indeterminacy?
title_fullStr Does stock market investment matter for local indeterminacy?
title_full_unstemmed Does stock market investment matter for local indeterminacy?
title_sort Does stock market investment matter for local indeterminacy?
author Cunha, João B.
author_facet Cunha, João B.
author_role author
dc.contributor.none.fl_str_mv Modesto, Leonor
Braga, Teresa Lloyd
Veritati - Repositório Institucional da Universidade Católica Portuguesa
dc.contributor.author.fl_str_mv Cunha, João B.
dc.subject.por.fl_str_mv Indeterminacy
Local dynamics
Secondary stock market
Decreasing returns to scale
Endogenous profits
Dynamic inefficiency
Steady state welfare
Domínio/Área Científica::Ciências Sociais::Economia e Gestão
topic Indeterminacy
Local dynamics
Secondary stock market
Decreasing returns to scale
Endogenous profits
Dynamic inefficiency
Steady state welfare
Domínio/Área Científica::Ciências Sociais::Economia e Gestão
description The purpose of this paper is to study the influence of stock market investment on the local dynamics of a standard overlapping generations (OLG) economy with capital accumulation. In particular, we focus on the emergence of local bifurcations and expectations-driven fluctuations in an economy with endogenous profits. We consider an OLG model with future consumption, decreasing returns to scale in production, and investment in both physical capital and firms’ shares. We analyze the local dynamics of our model in terms of relevant parameters, namely, the capital share of output, the elasticity of capital-labour substitution, and the degree of returns to scale. We conclude that the steady state is never a sink, and thus indeterminacy does not emerge (and hence does not hold as a possible explanation for the excess volatility puzzle at an aggregate level). The steady state is either a saddle or a source and undergoes a transcriptical bifurcation for values of the capital share of output sufficiently high. Finally, we compare steady state welfare with and without a secondary stock market. We conclude that the introduction of a secondary market for shares may correct the dynamic inefficiency that arises in a simple OLG model, improving steady state welfare when the capital share of output is sufficiently low (i.e. under strong dynamic inefficiency).
publishDate 2012
dc.date.none.fl_str_mv 2012-09-30
2012
2012-09-30T00:00:00Z
2013-10-11T09:56:20Z
dc.type.status.fl_str_mv info:eu-repo/semantics/publishedVersion
dc.type.driver.fl_str_mv info:eu-repo/semantics/masterThesis
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status_str publishedVersion
dc.identifier.uri.fl_str_mv http://hdl.handle.net/10400.14/12940
url http://hdl.handle.net/10400.14/12940
dc.language.iso.fl_str_mv eng
language eng
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instacron:RCAAP
instname_str Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação
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reponame_str Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
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