IDEAS home Printed from https://ideas.repec.org/a/mje/mjejnl/v8y2012i1p63-85.html
   My bibliography  Save this article

The Analysis Of Model Of General Economic Equilibrium And Financial Instability Of Economic System

Author

Listed:
  • Marko Backovic
  • Zoran Popovic

Abstract

The model of the economic system which is discussed in this paper is based on the assumption of the existence of the heterogeneous structure of economic agents. During this assumption, we analyze the general economic equilibrium model with incomplete asset market, the existence of monetary equilibrium and the emergence of financial instability of the economic system, as well as actions that are necessary for overcoming economic instability. The private sector is observed as a set of participants who have different utility functions. Also, it is assumed that there are more commercial banks, where each bank has their own portfolios, which reflect the different preferences the risk / profit. In the market conditions, each bank analyzes the credit worthiness of each borrower, and on the other side each borrower faces different credit markets. Therefore, in this paper, instead of the only market for deposits/loans, development of model will be conducted by analyzing more than one market for deposits and more than one market for loans. The private sector and commercial banks maximize their utility functions, while the role of the Central Bank and the public sector is exogenously given. Further, in the model, we look at money as the conditioned medium of exchange, whereby the Central Bank and the government have a monopoly on the issue of controlled money as a widely accepted method of payment. Also, depending on what is the function of money in the markets funds, we observe the same physical structure as endogenous or exogenous size.

Suggested Citation

  • Marko Backovic & Zoran Popovic, 2012. "The Analysis Of Model Of General Economic Equilibrium And Financial Instability Of Economic System," Montenegrin Journal of Economics, Economic Laboratory for Transition Research (ELIT), vol. 8(1), pages 63-85.
  • Handle: RePEc:mje:mjejnl:v:8:y:2012:i:1:p:63-85
    as

    Download full text from publisher

    File URL: http://repec.mnje.com/mje/2012/v08-n01/mje_2012_v08-n01-a12.pdf
    Download Restriction: no

    File URL: http://repec.mnje.com/mje/2012/v08-n01/mje_2012_v08-n01-a12.html
    Download Restriction: no

    References listed on IDEAS

    as
    1. Mas-Colell,Andreu, 1990. "The Theory of General Economic Equilibrium," Cambridge Books, Cambridge University Press, number 9780521388702, Fall.
    2. Pradeep Dubey & John Geanakoplos, 2003. "Real Determinacy with Nominal Assets," Cowles Foundation Discussion Papers 1427, Cowles Foundation for Research in Economics, Yale University.
    3. Cass, David & Siconolfi, Paolo & Villanacci, Antonio, 2001. "Generic regularity of competitive equilibria with restricted participation," Journal of Mathematical Economics, Elsevier, vol. 36(1), pages 61-76, September.
    4. Bullard, James & Smith, Bruce D., 2003. "The value of inside and outside money," Journal of Monetary Economics, Elsevier, vol. 50(2), pages 389-417, March.
    5. P. Herings & Karl Schmedders, 2006. "Computing equilibria in finance economies with incomplete markets and transaction costs," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 27(3), pages 493-512, April.
    6. Gaetano Bloise & Jacques Dréze & Herakles Polemarchakis, 2005. "Monetary equilibria over an infinite horizon," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 25(1), pages 51-74, January.
    7. P. Herings & Herakles Polemarchakis, 2005. "Pareto improving price regulation when the asset market is incomplete," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 25(1), pages 135-154, January.
    8. John Geanakoplos & Pradeep Dubey, 1989. "Liquidity and Bankruptcy with Incomplete Markets: Pure Exchange," Cowles Foundation Discussion Papers 900, Cowles Foundation for Research in Economics, Yale University.
    9. Philippe Baptiste & Jacques Carlier & Alix Munier & Andreas Schulz, 2004. "Introduction," Annals of Operations Research, Springer, vol. 129(1), pages 17-19, July.
    10. DREZE, Jacques H. & POLEMARCHAKIS, Heracles M., 1998. "Intertemporal general equilibrium and monetary theory," CORE Discussion Papers 1998053, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    11. Philippe Robert-Demontrond & R. Ringoot, 2004. "Introduction," Post-Print halshs-00081823, HAL.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mje:mjejnl:v:8:y:2012:i:1:p:63-85. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Nikola Draskovic Jelcic). General contact details of provider: http://www.mnje.com .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.