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Journal Articles Journal of Mathematical Economics Year : 2017

International transmission of bubble crashes in a two-country overlapping generations model

Abstract

We study the international transmission of bubble crashes by analyzing stationary sunspot equilibria in a two-country overlapping generations exchange economy with stochastic bubbles. We consider two cases of sunspot shocks. In the first case, we assume that only the foreign country receives a sunspot shock, while in the second, we assume that both countries independently receive sunspot shocks. In the first case, a bubble crash in the foreign country is always accompanied by a bubble crash in the home country. In the second case, a bubble crash in the foreign country can have a positive or negative effect on the home bubble. We also show that there exists a unique locally isolated stationary sunspot equilibrium, and that it is locally unstable.
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Dates and versions

hal-01505766 , version 1 (11-04-2017)

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Lise Clain-Chamosset-Yvrard, Takashi Kamihigashi. International transmission of bubble crashes in a two-country overlapping generations model. Journal of Mathematical Economics, 2017, 68, pp.115-126. ⟨10.1016/j.jmateco.2016.01.004⟩. ⟨hal-01505766⟩
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