Disaggregation of excess demand and comparative statics with incomplete markets and nominal assets
AbstractWe 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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Bibliographic InfoArticle provided by Springer in its journal Economic Theory.
Volume (Year): 13 (1999)
Issue (Month): 2 ()
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; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
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