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The Structure of Financial Equilibrium with Exogenous Yields: The Case of Incomplete Markets

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Balasko, Yves
Cass, David

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Abstract

This paper presents an analysis of the structure of competitive equilibrium in a smooth, exchange economy where there are incomplete markets in financial instruments whose overall payoffs (both prices and yields) are fixed in units of account. The main result establishes that such market incompleteness generates a comparable degree of allocation indeterminateness. It is also shown how this real indeterminacy may increase when prices and yields are treated as variables rather than parameters. Copyright 1989 by The Econometric Society.

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Publisher Info
Article provided by Econometric Society in its journal Econometrica.

Volume (Year): 57 (1989)
Issue (Month): 1 (January)
Pages: 135-62
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Handle: RePEc:ecm:emetrp:v:57:y:1989:i:1:p:135-62

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  1. Faias, Marta, 2004. "General equilibrium and endogenous creation of asset markets," FEUNL Working Paper Series wp454, Universidade Nova de Lisboa, Faculdade de Economia. [Downloadable!]
  2. Mario Tirelli, 2003. "Income taxation when markets are incomplete," Decisions in Economics and Finance, Springer, vol. 26(2), pages 97-128, November. [Downloadable!] (restricted)
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  3. Alessandro Citanna & Antonio Villanacci, . ""Financial Innovation and Expectations''," CARESS Working Papres 95-01, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences. [Downloadable!]
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  4. Paola Donati, 2003. "Indeterminacy of rational expectations equilibria in sequential financial markets," Working Paper Series 262, European Central Bank. [Downloadable!]
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  5. Jinhui H. Bai & Ingolf Schwarz, 2005. "Monetary Equilibria in a Cash-in-Advance Economy with Incomplete Financial Markets," JEPS Working Papers 05-005, JEPS. [Downloadable!]
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  6. SALTO, Matteo, 1998. "Indeterminacy of equilibrium allocations in monetary open economies," CORE Discussion Papers 1998062, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE). [Downloadable!]
  7. Pascal Stiefenhofer, 2009. "Production in General Equilibrium with Incomplete Markets," Discussion Papers 09/06, Department of Economics, University of York. [Downloadable!]
  8. Pavlova, Anna & Cass, David, 2002. "On Trees and Logs," Working papers 4233-02, Massachusetts Institute of Technology (MIT), Sloan School of Management. [Downloadable!]
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  9. Pradeep Dubey & John Geanakoplos, 2000. "Inside and Outside Money, Gains to Trade, and IS-LM," Cowles Foundation Discussion Papers 1257R, Cowles Foundation, Yale University, revised Jun 2001. [Downloadable!]
  10. TIRELLI, Mario, 2000. "Capital income taxation when markets are incomplete," CORE Discussion Papers 2000011, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE). [Downloadable!]
  11. David Cass, 2006. "Musings on the Cass Trick," PIER Working Paper Archive 06-011, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania. [Downloadable!]
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  12. Christophe Prechac & Aditya Goenka, 2004. "Are Sunspots Inevitable?," Econometric Society 2004 Far Eastern Meetings 786, Econometric Society. [Downloadable!]
  13. Pradeep Dubey & John Geanakoplos, 2000. "Inside and Outside Money, Gains to Trade, and IS-LM," Cowles Foundation Discussion Papers 1257, Cowles Foundation, Yale University. [Downloadable!]
  14. Leo Ferraris, 2003. "Inside Versus Outside Money: Indeterminacy In Gei Models," Working Papers 62, Sapienza University of Rome, Department of Public Economics. [Downloadable!]
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