This paper develops theoretical foundations for an error analysis of approximate equilibria in dynamic stochastic general equilibrium models with heterogeneous agents and incomplete financial markets. While there are several algorithms that compute prices and allocations for which agents'...

We describe a homotopy algorithm for the computation of equilibria in Stochastic Finance Economies. The algorithm solves a nonlinear system of equations consisting of the first-order conditions of the agents' utility maximization problems and market-clearing conditions. Moreover, we discuss the...

We consider an infinite horizon exchange economy with incomplete markets and default. As in Geanakoplos and Zame (1998) financial securities are traded if the promises associated with them are backed by collateral. The only collateral available in our economy are shares of Lucas trees. We prove...

In this paper we examine the likelihood of multiple real steady states in deterministic exchange economies with overlapping generations. There is a single good and a single agent per generation with constant relative risk aversion expected utility. In order to test for multiple equilibria we...

In this paper we examine non-parametric restrictions on counterfactual analysis in a simple dynamic stochastic general equilibrium model. Under the assumption of time-separable expected utility and complete markets all equilibria in this model are stationary, the Arrow-Debreu prices uniquely...

The paper examines a game-theoretic model of a financial market in which asset prices are determined endogenously in terms of short-run equilibrium. Investors use general, adaptive strategies depending on the exogenous states of the world and the observed history of the game. The main goal is to...

Equilibrium allocations in models with incomplete markets are generally not Pareto-efficient, but some argue that the welfare losses from missing assets are small when time-horizons are long, agents are patient, and shocks are transitory. We show that even in the simplest infinite horizon model...

We consider a Lucas asset-pricing model with heterogeneous agents, exogenous labor income, and a finite number of exogenous shocks. Although agents are infinitely lived, endowments and dividends are time-invariant functions of the exogenous shock alone and are thus restricted to lie in a...