Does stock market investment matter for local indeterminacy?
Autor(a) principal: | |
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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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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 |
format |
masterThesis |
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 |
dc.rights.driver.fl_str_mv |
info:eu-repo/semantics/openAccess |
eu_rights_str_mv |
openAccess |
dc.format.none.fl_str_mv |
application/pdf |
dc.source.none.fl_str_mv |
reponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação instacron:RCAAP |
instname_str |
Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação |
instacron_str |
RCAAP |
institution |
RCAAP |
reponame_str |
Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
collection |
Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
repository.name.fl_str_mv |
Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação |
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1799131778810642432 |