Infinite Horizon Incomplete Markets

Michael Magill and Martine Quinzii

Econometrica, 1994, vol. 62, issue 4, 853-80

Abstract: This paper extends the general equilibrium model with incomplete markets to an open-ended future, thereby providing a natural setting for analyzing problems in macroeconomics. Two concepts of equilibrium are defined that prevent agents from entering into Ponzi schemes: the first is based on debt constraints and the second is based on a transversality condition that limits the rate of growth of debt. Under the assumption that agents are impatient (Mackey continuity of preferences) and have a degree of impatience that is bounded below, the two concepts of equilibrium are shown to coincide and lead to existence of equilibrium. Copyright 1994 by The Econometric Society.

Date: 1994
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Related works:
Working Paper: Infinite Horizon Incomplete Markets (1993)
Working Paper: Infinite Horizon Incomplete Markets (1992)
Working Paper: Infinite Horizon Incomplete Markets (1992)
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