Disaggregation of excess demand and comparative statics with incomplete markets and nominal assets |
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Authors: | Piero Gottardi Thorsten Hens |
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Institution: | (1) Dipartimento di Scienze Economiche, University of Venice, Venice, ITALY, IT;(2) Department of Economics, University of Bielefeld, Postfach 100 131, D-33501 Bielefeld, GERMANY (e-mail: thens@wiwi.uni-bielefeld.dc), DE |
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Abstract: | Summary. We prove that locally, Walras' law and homogeneity characterize the structure of market excess demand functions when financial
markets are incomplete and assets' returns are nominal. The method of proof is substantially different from all existing arguments
as the properties of individual demand are also different. We show that this result has important implications and is part
of a more general result that excess demand is an essentially arbitrary function not just of prices, but also of the exogenous
parameters of the economy as asset returns, preferences, and endowments. Thus locally the equilibrium manifold, relating equilibrium
prices to these parameters has also no structure.
Received: September 17, 1996; revised version: November 7, 1997 |
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Keywords: | and Phrases: Excess demand functions Incomplete markets |
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