The Role of Fiscal Policy in an Incomplete Markets Framework
Charles Thomas ()
Review of Economic Studies, 1995, vol. 62, issue 3, 449-468
A general-equilibrium model is developed to highlight the link between neo-Keynesian models of unemployment and recent results on the constrained sub-optimality of competitive economies with incomplete asset markets. Although the model deviates from the Arrow-Debreu paradigm only by the absence of some contingent claims, the competitive equilibrium exhibits under-employment and balanced-budget fiscal policies have Keynesian effects which are Pareto improving.
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Persistent link: https://EconPapers.repec.org/RePEc:oup:restud:v:62:y:1995:i:3:p:449-468.
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