Computable general equilibrium with financial markets |
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Authors: | Felix Kubler |
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Institution: | (1) Department of Economics, Stanford University, Stanford, CA 94305-6072, USA (e-mail: fkubler@stanford.edu) , US |
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Abstract: | Summary. There are a wide variety of theoretical general equilibrium models with incomplete security markets. In this paper we give
a general recipe for using homotopy algorithm to compute equilibria in these models. In many models, taxes, transaction-costs
or other market frictions introduce the additional difficulty that equilibrium prices or choices (but not equilibrium allocations)
may be undetermined. In order to demonstrate how these difficulties can be dealt with, we develop a globally convergent algorithm
to compute equilibria in a model with cash-in-advance constraints, several goods and incomplete financial markets. Furthermore
we describe how to implement the algorithm using a publicly available suite of subroutines for homotopy-pathfollowing.
Received: October 1, 1999; revised version: December 16, 2000 |
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Keywords: | and Phrases: General equilibrium Computational methods Incomplete markets |
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