Disaggregation of excess demand and comparative statics with incomplete markets and nominal assets

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Disaggregation of excess demand and comparative statics with incomplete markets and nominal assets

Author Info

Thorsten Hens () (Department of Economics, University of Bielefeld, Postfach 100 131, D-33501 Bielefeld, GERMANY)
Piero Gottardi (Dipartimento di Scienze Economiche, University of Venice, Venice, ITALY)

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Piero Gottardi

Abstract

We prove that locally, Walras' law and homogeneity characterize the structure of market excess demand functions when financial markets are incomplete and assets' returns are nominal. The method of proof is substantially different from all existing arguments as the properties of individual demand are also different. We show that this result has important implications and is part of a more general result that excess demand is an essentially arbitrary function not just of prices, but also of the exogenous parameters of the economy as asset returns, preferences, and endowments. Thus locally the equilibrium manifold, relating equilibrium prices to these parameters has also no structure.

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Publisher Info
Article provided by Springer in its journal Economic Theory.

Volume (Year): 13 (1999)
Issue (Month): 2 ()
Pages: 287-308
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Handle: RePEc:spr:joecth:v:13:y:1999:i:2:p:287-308

Note: Received: September 17, 1996; revised version: November 7, 1997
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Find related papers by JEL classification:
D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
C62 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Existence and Stability Conditions of Equilibrium

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

Sergio Turner, 2006. "Theory of Demand in Incomplete Markets," Working Papers 2006-07, Brown University, Department of Economics. [Downloadable!]
Sergio Turner, 2006. "Pareto Improving Financial Innovation in Incomplete Markets," Working Papers 2006-10, Brown University, Department of Economics. [Downloadable!]

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