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Existence and Uniqueness of Equilibrium in Nonoptimal Unbounded Infinite Horizon Economies with Capital

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In applied work in macroeconomics and finance, nonoptimal infinite horizon economies are often studied in which the state space is unbounded. Important examples of such economies are single sector growth models with production externalities, valued fiat money, monopolistic competition, and/or distortionary government taxation. Although sufficient conditions for existence and uniqueness of Markovian equilibrium are well known for the compact state space case, no similar sufficient conditions exist for unbounded growth. This paper provides such a set of sufficient conditions, and also presents a computational algorithm that will prove asymptotically consistent when computing Markovian equilibrium.

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  • Kevin Reffett & Olivier Morand, "undated". "Existence and Uniqueness of Equilibrium in Nonoptimal Unbounded Infinite Horizon Economies with Capital," Working Papers 2133378, Department of Economics, W. P. Carey School of Business, Arizona State University.
    • Handle: RePEc:asu:wpaper:2133378
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    Cited by:

    1. Tom Krebs, 2006. "Recursive equilibrium in endogenous growth models with incomplete markets," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 29(3), pages 505-523, November.

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