# Supplement to Martingale properties of self-enforcing debt''

## Author Info

• Bidian, Florin
• Bejan, Camelia
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## Abstract

We present some complementary results to Bidian and Bejan (2012). Part 1 provides necessary and sufficient transversality conditions for an agent's optimization problem. They are extensions to stochastic environments of the conditions given by Kocherlakota (1992), or alternatively, extensions to nonzero debt constraints of the corresponding conditions in Forno2003}. Part \ref{ap:B} presents an elementary proof of the characterization of NTT debt limits (Theorem 3.5 in the main paper) for the case when debt constraints bind in bounded time, that requires no martingale techniques or boundedness assumptions on the discounted debt limits. Part \ref{ap:C} complements results in Section 5.1 (in the main paper), showing that all the equilibria that can sustain bubbles under an interdiction to trade can be achieved from fixed, zero initial wealth for the agents. Thus endogeneity of debt limits causes multiplicity of not only asset prices (through bubbles), but also of real equilibrium allocations.

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## Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 36610.

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Date of revision: 12 Feb 2012
Handle: RePEc:pra:mprapa:36610

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## Related research

Keywords: rational bubbles; transversality conditions; endogenous debt limits; not-too-tight constraints; self-enforcing debt; limited enforcement;

Find related papers by JEL classification:

• E0 - Macroeconomics and Monetary Economics - - General
• G0 - Financial Economics - - General

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## References

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1. Bidian, Florin & Bejan, Camelia, 2011. "Martingale properties of self-enforcing debt," MPRA Paper 36609, University Library of Munich, Germany, revised 12 Feb 2012.
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## Citations

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Cited by:
1. Gaetano Bloise & Pietro Reichlin & Mario Tirelli, 2013. "Fragility of Competitive Equilibrium with Risk of Default," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(2), pages 271-295, April.

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