Non-parametric counterfactual analysis in dynamic general equilibrium

Felix Kubler and Karl Schmedders

No 09-05, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: In this paper we examine non-parametric restrictions on counterfactual analysis in a 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. The equilibrium correspondence, de¯ned 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 possible 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. Although restrictions on possible price changes often exist, we show that results from a representative-agent economy usually 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: 2009-02
New Economics Papers: this item is included in nep-dge and nep-mic
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Citations: View citations in EconPapers (1)

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http://ssrn.com/abstract=1368679 (application/pdf)

Related works:
Journal Article: Non-parametric counterfactual analysis in dynamic general equilibrium (2010)
Working Paper: Non-parametric counterfactual analysis in dynamic general equilibrium (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp0905

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