Computable general equilibrium with financial markets

Felix Kubler

Economic Theory, 2001, vol. 18, issue 1, 73-96

Abstract: 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.

Keywords: General equilibrium; Computational methods; Incomplete markets. (search for similar items in EconPapers)
JEL-codes: C68 D52 D58 G11 G12 (search for similar items in EconPapers)
Date: 2001-04-11
Note: Received: October 1, 1999; revised version: December 16, 2000
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Citations: View citations in EconPapers (3)

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