A simple model of cost innovation in a monetary economy is presented that illustrates the essentially dynamic model of Schumpeter involving breaking the circular flow of capital is logically consistent with the General Equilibrium (GE) model of an exchange and production economy. The GE model as presented by Arrow, Debreu and McKenzie is a nonprocess model; and the original theory deals with th...

This paper develops and analyzes a general-equilibrium model with sticky information. The only rigidity in goods, labor, and financial markets is that agents are inattentive, sporadically updating their information sets, when setting prices, wages, and consumption. After presenting the ingredients of such a model, the paper develops an algorithm to solve this class of models and uses it to stud...

In this paper, we introduce and consider a new class of equilibrium variational inequalities, called the mixed general equilibrium bifunction variational inequalities. We suggest and analyze some proximalmethods for solvingmixed general equilibriumbifunction variational inequalities using the auxiliary principle technique. Convergence of these methods is considered under somemild suitable condi...

We develop a general-equilibrium model of inventories with explicit micro-foundations by embedding the production-cost-smoothing motive (e.g., Eichenbaum, AER 1989) into an otherwise standard DSGE model. We show that …rms facing idiosyncratic cost shocks have incentives to bunch production and smooth sales by carrying inventories. The optimal inventory target of a …rm is derived explicitly. The...

I consider an exchange economy in which each agent’s preferences are given by Ui = ui + θF , where ui is a standard utility function, F is a social objective function and θ is the weight F receives. Both F and θ are common to all individuals. I show that F ’s equilibrium value may be a decreasing function of θ. I also show that if F is a social welfare function whose argument are the ui’s, then...

Most theoretical studies of corruption develop micro models of individual acts while empirical papers study corruption at the country level. We build an agent-based model to provide the missing link between these two groups. Here the societal corruption level is derived from individual corruption levels optimally chosen by agents with varying risk aversion and human capital. It, in turn, affect...

This article is concerned with identification problem of parameters of Dynamic Stochastic General Equilibrium Models with emphasis on structural constraints, so that the number of observable variables is equal to the number of exogenous variables. We derived a set of identifiability conditions and suggested a procedure for a thorough analysis of identification at each point in the parameters sp...

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