This study investigates the constrained suboptimality of a futures market equilibrium in incomplete markets. It explains the constrained suboptimality in terms of the pecuniary externalities that futures trading may cause by affecting spot relative prices. It presents the decomposition of a...

In the present paper, we consider a two-country, two-good, two-factor general equilibrium model with CIES non-linear preferences, asymmetric technologies across countries and decreasing returns to scale. It is shown that aggregate instability and endogenous fluctuations may occur due to...