The Structure of the Set of Sunspot Equilibria in Economies with Incomplete Financial Markets
AbstractThis paper considers the set of equilibria of two-period, sunspot economies with "S" purely extrinsic states of nature in the second period and "I" assets with linearly independent nominal payoffs. The span of the payoff matrix contains the vector [1, . . . ,1] (i.e., inside money). The set of economies is described in terms of (sunspot-invariant) utility functions. If "S" > "I" > O, there is an open, dense set of economies such that, given a vector of no arbitrage asset prices, the set of equilibrium allocations contains a smooth manifold of dimension "S"-"I". Such a manifold contains at least one nonsunspot equilibrium (and at most a finite number of such equilibria).
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Bibliographic InfoArticle provided by Springer in its journal Economic Theory.
Volume (Year): 2 (1992)
Issue (Month): 3 (July)
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Web page: http://link.springer.de/link/service/journals/00199/index.htm
Other versions of this item:
- Pietra, T., 1991. "The structure of the set of sunspot equilibria in economies with incomplete financial markets," CORE Discussion Papers 1991032, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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