In a pure-exchange economy involving one perishable consumption good and risk-averse consumers, the elasticity of a consumer’s Pareto-efficient consumption with respect to aggregate output equals the reciprocal of the ratio of the consumer’s coefficient of relative risk aversion to average relative risk aversion. Therefore, this elasticity is unity for someone with average relative risk aversion, whereas consumers with above average relative risk aversion transfer some of their aggregate- output risk to consumers with below average relative risk aversion. This result has important implications on the financial securities needed to complete markets, inflation indexing, and central bank goals and targeting objectives.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by EconWPA in its series Microeconomics with number
0509004.
Length: 20 pages Date of creation: 12 Sep 2005 Date of revision: Handle: RePEc:wpa:wuwpmi:0509004
Note: Type of Document - pdf; pages: 20. This deals with Arrow- Debreu pure-exchange economies without storage. Contact details of provider: Web page: http://129.3.20.41
For technical questions regarding this item, or to correct its listing, contact: (EconWPA).
References listed on IDEAS 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.: