Summary
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.
I thank an anonymous referee for helpful comments. I gratefully acknowledge financial support from the National Science Foundation.
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© 2004 Springer-Verlag Berlin Heidelberg
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Sandroni, A. (2004). Speculative trade, asset prices and investment levels. In: Aliprantis, C.D., Arrow, K.J., Hammond, P., Kubler, F., Wu, HM., Yannelis, N.C. (eds) Assets, Beliefs, and Equilibria in Economic Dynamics. Studies in Economic Theory, vol 18. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-662-05858-9_12
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DOI: https://doi.org/10.1007/978-3-662-05858-9_12
Publisher Name: Springer, Berlin, Heidelberg
Print ISBN: 978-3-642-05663-5
Online ISBN: 978-3-662-05858-9
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