Computing Equilibria when Asset Markets are Incomplete
نویسندگان
چکیده
JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact [email protected].. The Econometric Society is collaborating with JSTOR to digitize, preserve and extend access to Econometrica. Existence of equilibrium with incomplete markets is problematic because demand functions are typically not continuous. Discontinuities occur at prices for which a marketed asset suddenly becomes redundant. We show that this discontinuity disappears if we allow an agent in the economy to introduce a new asset when such redundancies occur. This enables us to prove existence with incomplete markets using a standard path-following argument. Hence, available algorithms for path-following in RK can be applied to compute equilibria in the GEI case. We demonstrate this by computing equilibrium for a numerical example.
منابع مشابه
An interior-point algorithm for computing equilibria in economies with incomplete asset markets
Computing equilibria in general equilibria models with incomplete asset (GEI) markets is technically difficult. The standard numerical methods for computing these equilibria are based on homotopy methods. Despite recent advances in computational economics, much more can be done to enlarge the catalog of techniques for computing GEI equilibria. This paper presents an interior point algorithm tha...
متن کاملComputing equilibria in in"nite-horizon "nance economies: The case of one asset
We develop methods to compute equilibria in dynamic models with incomplete asset markets and heterogeneous agents. Using spline interpolation methods we approximate recursive trading policies of the agents and the equilibrium pricing functions. We explore various methods for determining the coe$cients of these approximations, including time iteration methods and acceleration techniques. Explori...
متن کاملIndeterminacy and Asset Price Volatility in Stochastic Overlapping Generations Models∗
This paper addresses the e ects of indeterminacy on the volatility of asset prices in a stochastic overlapping generations model with 3-period lived agents. With complete markets, indeterminacy is characterized by the initial conditions and all equilibria converge to one of the deterministic steady states in the long run. With incomplete markets, the degree of indeterminacy is countably innite....
متن کاملFood storage, multiple equilibria and instability: why stable markets may become unstable during food crises
A temporary-equilibrium model replicating institutional features of low-income agricultural economies is developed. In this model, food is held as an asset; because food production is relatively volatile, those with negative temporary income are net buyers of food. When food is the only asset, asset effects are likely to reduce the price-elasticity of the demand for food and can make it tatonne...
متن کاملComputing general equilibrium with incomplete markets and default
General economic equilibrium with incomplete markets and default represents an important tool in competitive economic theory, and has led to fundamental insights into the behavior of real and financial markets. The numerical computation of these models is important for understanding the behavior of the real world economy, and may lead to insights on the effects of regulation and welfare. Howeve...
متن کاملذخیره در منابع من
با ذخیره ی این منبع در منابع من، دسترسی به آن را برای استفاده های بعدی آسان تر کنید
عنوان ژورنال:
دوره شماره
صفحات -
تاریخ انتشار 2007