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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 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)
JEL-codes: D52 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2014-12, Revised 2015-10
New Economics Papers: this item is included in nep-dge
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Published in Journal of Mathematical Economics, Elsevier, vol 62, Issue C, pages 19-27

Downloads: (external link)
ftp://mse.univ-paris1.fr/pub/mse/CES2014/14095R.pdf (application/pdf)
https://www.sciencedirect.com/science/article/pii/S0304406815001299

Related works:
Journal Article: Credit segmentation in general equilibrium (2016) Downloads
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) Downloads
Working Paper: Credit segmentation in general equilibrium (2015) Downloads
Working Paper: Credit segmentation in general equilibrium (2014)
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