Disaggregation of excess demand and comparative statics with incomplete markets and nominal assets

Thorsten Hens () and Piero Gottardi
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Thorsten Hens: Department of Economics, University of Bielefeld, Postfach 100 131, D-33501 Bielefeld, GERMANY

Economic Theory, 1999, vol. 13, issue 2, 287-308

Abstract: 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.

Keywords: Excess; demand; functions; ·; Incomplete; markets. (search for similar items in EconPapers)
JEL-codes: C62 D52 (search for similar items in EconPapers)
Date: 1999-02-17
Note: Received: September 17, 1996; revised version: November 7, 1997
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Citations: View citations in EconPapers (15)

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