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Bankruptcy in general equilibrium

Author

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  • Tarun Sabarwal

Abstract

In this paper, I construct a model of an exchange economy in which bankruptcy arises in a manner similar to what we observe. This model is a more realistic representation of some markets in which intertemporal assets are traded. Using standard and natural assumptions, I show that every economy represented by this model has an equilibrium. Using examples, I highlight some welfare effects of bankruptcy.

Suggested Citation

  • Tarun Sabarwal, 2000. "Bankruptcy in general equilibrium," Finance and Economics Discussion Series 2000-48, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgfe:2000-48
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    File URL: http://www.federalreserve.gov/pubs/feds/2000/200048/200048abs.html
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    File URL: http://www.federalreserve.gov/pubs/feds/2000/200048/200048pap.pdf
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    Cited by:

    1. Braido, Luis H.B., 2008. "Trading constraints penalizing default: A recursive approach," Journal of Mathematical Economics, Elsevier, vol. 44(2), pages 157-166, January.

    More about this item

    Keywords

    Bankruptcy; Econometric models;

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