Credit segmentation in general equilibrium

Sebastián Cea-Echenique () and Juan Pablo Torres-Martinez
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Sebastián Cea-Echenique: PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique

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Abstract: We build a general equilibrium model with endogenous borrowing constraints compatible with credit segmentation. There are personalized trading restrictions connecting prices with both portfolio constraints and consumption possibilities, a setting which has not thoroughly been addressed by the literature. Our approach is general enough to be compatible with incomplete market economies where there exist wealth-dependent and/or investment-dependent credit access, borrowing constraints precluding bankruptcy, or assets backed by physical collateral. To prove equilibrium existence, we assume that both investment on segmented assets is not required to obtain access to credit and transfers implementable in segmented markets can be super-replicated by investing in non-segmented markets. For instance, this super-replication property is satisfied if either (i) all individuals have access to borrow at a risk-free rate; or (ii) financial contracts make real promises in terms of non-perishable commodities; or (iii) promises are backed by physical collateral.

Keywords: Incomplete Markets; General Equilibrium; Endogenous Trading Constraints (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (10)

Published in Journal of Mathematical Economics, 2016, Journal of Mathematical Economics, Janvier (62), pp.19-27. ⟨10.1016/j.jmateco.2015.10.011⟩

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Related works:
Journal Article: Credit segmentation in general equilibrium (2016)
Working Paper: Credit segmentation in general equilibrium (2016)
Working Paper: Credit segmentation in general equilibrium (2016)
Working Paper: Credit segmentation in general equilibrium (2015)
Working Paper: Credit segmentation in general equilibrium (2015)
Working Paper: Credit segmentation in general equilibrium (2015)
Working Paper: Credit segmentation in general equilibrium (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:pseptp:halshs-01374293

DOI: 10.1016/j.jmateco.2015.10.011

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