Fulltext

Dynamic Competitive Economies with Complete Markets and Collateral Constraints

Gottardi, Piero ; Kubler, Felix

In: The Review of Economic Studies, 2015, vol. 82, no. 3, p. 1119-1153

Ajouter à la liste personnelle
    Titre
    • Dynamic Competitive Economies with Complete Markets and Collateral Constraints
    Auteur
    • Gottardi, Piero. Department of Economics, European University Institute and University of Venice
    • Kubler, Felix. IBF, University of Zurich and Swiss Finance Institute
    Type de document
    • Postprint
    Langue
    • Anglais
    Publié dans
    • The Review of Economic Studies, 2015, vol. 82, no. 3, p. 1119-1153. Oxford University Press
    Autre version électronique
    Identifiant OAI-PMH
    • oai:doc.rero.ch:292761
    Summary
    In this article we examine the competitive equilibria of a dynamic stochastic economy with complete markets and collateral constraints. We show that, provided the sets of asset pay-offs and of collateral levels are sufficiently rich, the equilibrium allocations with sequential trades and collateral constraints are equivalent to those obtained in Arrow-Debreu markets subject to a series of limited pledgeability constraints. We provide both necessary and sufficient conditions for equilibria to be Pareto efficient and show that when collateral is scarce equilibria are not only Pareto inefficient but also often constrained inefficient, in the sense that imposing tighter borrowing restrictions can make everybody in the economy better off. We derive sufficient conditions for the existence of Markov equilibria and, for the case of two agents, for the existence of equilibria that have finite support. These equilibria can be computed with arbitrary accuracy and the model is very tractable