We need to think more carefully the consequences of a permantent r-g+rp<0 for asset valuations. We have no framework for that regime. Concepts such as solvency or "liquidity" (whatever that means), let alone resource constraints, vanish.
Counterpoint - we don’t need to think about this because rp is just the number that you plug into a valuation formula (given r and g) to make the sum of discounted cash flows equal the current price. With that point of view it’s impossible to have r-g+rp<0
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Of course both g and rp are unobservable so this is all
anyway -
I was replying this, yes, actually r is unobservable as well. Tons of estimation issues, many papers. My point is conceptual rather than practical. Meaning that the analytical apparatus becomes obsolete in a framework in which constraints don't hold.
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