Non-parametric counterfactual analysis in dynamic general equilibrium

Felix Kubler and Karl Schmedders

PIER Working Paper Archive from Penn Institute for Economic Research, Department of Economics, University of Pennsylvania

Abstract: In this paper we examine non-parametric restrictions on counterfactual analysis in a simple dynamic stochastic general equilibrium model. Under the assumption of time-separable expected utility and complete markets all equilibria in this model are stationary, the Arrow-Debreu prices uniquely reveal the probabilities and discount factor and the equilibrium correspondence defined as the map from endowments to stationary (probability-free) state prices, is identical to the equilibrium correspondence in a standard Arrow-Debreu exchange economy with additively separable utility. We examine observable restriction on this correspondence and give necessary as well as sufficient conditions on profiles of individual endowments that ensure that associated equilibrium prices cannot be arbitrary. While often there are restrictions on possible price changes we also show that in most cases results from a single agent economy do not carry over to a setting with heterogeneous agents.

Keywords: Dynamic general equilibrium; non-parametric analysis; observable restrictions (search for similar items in EconPapers)
JEL-codes: D50 G10 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2007-09-17
New Economics Papers: this item is included in nep-dge and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Non-parametric counterfactual analysis in dynamic general equilibrium (2010)
Working Paper: Non-parametric counterfactual analysis in dynamic general equilibrium (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:pen:papers:07-027

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