We relate wealth redistribution, asset pricing, and trade in financial assets by introducing heterogeneous agents into a Lucas tree-model. Heterogeneity of agents causes trade in financial assets and dynamic wealth redistribution. When consumers have time-separable, constant elasticity utilities...

We derive a closed-form expression for the differences between forward and futures prices in the framework of a Lucas (1978) equilibrium model. We calculate this difference for fixed-income securities in two ways: 1. Using historic interest rate data to calibrate the matrix of nominal state...

This paper develops a general equilibrium model for analyzing the interaction of corporate financial and production decisions, consumers’ behavior and government financing. We use the model to investigate how changes in income tax rates and government debt policy affect production, interest...

In this paper we show that even in incomplete markets a plausible firm objective function may be defined, and that this objective function coincides with the Arrow-Debreu objective function in complete markets. Our major theorem shows that a production plan may be found which will always win the...