Equilibrium with Incomplete Financial Markets: Uniqueness of Equilibrium Expectations and Real Indeterminacy

Tito Pietra and Paolo Siconolfi
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Paolo Siconolfi: Graduate School of Business, Colombia University

No 1993034, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: We consider a general equilibrium model with incomplete financial markets and nominal assets. Asset prices are given. Let D be the number of "missing" assets. If the number of agents is greater than 2(D+ 1) and the number of period zero commodities greater than (2D + 1), there is a dense, residual set of economies (parameterized by utility functions) such that, for each pair of distinct financial equilibria, spot zero equilibrium prices are different. Hence, agents, observing first period equilibrium prices, can formulate exact forecasts on future equilibrium prices, notwithstanding the real indeterminacy of the set of financial equilibria.

Keywords: Incomplete Markets; Uniqueness; Indeterminacy (search for similar items in EconPapers)
JEL-codes: D50 D52 (search for similar items in EconPapers)
Date: 1993-06-01
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Persistent link: https://EconPapers.repec.org/RePEc:cor:louvco:1993034

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