Credit segmentation in general equilibrium

Sebastián Cea and Juan Pablo Torres-Martinez

Documents de travail du Centre d'Economie de la Sorbonne from Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne

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 transfers implementable in segmented markets can be super-replicated by investments in non-segmented markets. We prove that equilibrium exists because of this super-replication property, which 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)
JEL-codes: D52 (search for similar items in EconPapers)
Date: 2014-12
New Economics Papers: this item is included in nep-dge
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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 (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)
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Persistent link: https://EconPapers.repec.org/RePEc:mse:cesdoc:14095

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