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On the existence and uniqueness of stationary equilibrium in Bewley economies with production

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  • Açıkgöz, Ömer T.

Abstract

I prove existence of stationary recursive competitive equilibrium in Bewley economies with production under specifications in which (i) the utility function is allowed to be unbounded, and (ii) the underlying discrete idiosyncratic productivity process can take any form, aside from mild restrictions. Some of the intermediate results provide theoretical basis for assumptions often made in the quantitative macroeconomics literature. By providing an example, I illustrate that the equilibrium is not necessarily unique, even under typical specifications of the model, and discuss the underlying reasons for multiplicity.

Suggested Citation

  • Açıkgöz, Ömer T., 2018. "On the existence and uniqueness of stationary equilibrium in Bewley economies with production," Journal of Economic Theory, Elsevier, vol. 173(C), pages 18-55.
    • Handle: RePEc:eee:jetheo:v:173:y:2018:i:c:p:18-55
    DOI: 10.1016/j.jet.2017.10.006
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    More about this item

    Keywords

    Bewley–Aiyagari model; Recursive competitive equilibrium;

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

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