Dear Johannes,
Thank you very much for your helpful guidance, I am grateful.
In a DSGE model, is it possible to allow for coexistence of a bubbly equilibrium for asset price bubble (e.g. positive asset price bubble in equilibrium (assume asset price bubble generates dividends through enhance firms’ borrowing capacity and relax credit constraint)) and ruling out Ponzi schemes? I mean can a bubbly equilibrium for asset bubbles and no Ponzi scheme in equilibrium?
Thank you very much and look forward to hearing from you.
Best regards,
Jesse
I am not sure the terminology you use is well-defined. A no-Ponzi condition usually means not being allowed to borrow additional money/resources to pay back old debt. But that does not restrict accumulation of assets. Here, the transversality condition comes into play.