We study a strategic market game with finitely many traders, infinite horizon and real assets. To this standard framework (see, e.g. Giraud and Weyers, 2004) we add two key ingredients: First, default is allowed at equilibrium by means of some collateral requirement for financial assets; second,...

This paper argues that the introduction of a short-sale constraint in the Arrow-Radner frameworkinvalidates standard definitions of complete and incomplete markets. In this constrained set-up,two threshold values with familiar properties arise.The case of a zero short-sale bound set on some...

We propose an extension of the incomplete markets general equilibrium model with production to situations in which firms default. In the model, firms are assumed to be owned by a single individual whose roles as entrepreneur and consumer are anonymous. Assets are exogenously collateralised and...

Empirical evidence indicates local jurisdictions are internally more heterogeneous than standard sorting models predict. We develop a dynamic multi-region model, with fluctuating regional house prices, where an owner-occupying household's location choice depends on its current wealth and its...

Many recent papers in macroeconomics have studied the implications of models with household heterogeneity and incomplete financial markets under the assumption that households own the stock of physical capital and undertake the intertemporal investment decisions. In these models, production...

In this paper we introduce markets for information about assets' payoffs in a two-period General Equilibrium Incomplete Markets Model. We consider asymmetric Walrasian equilibria with endogenous information allocations and analyze the interaction between demand for information and equilibrium...

Empirical evidence indicates local jurisdictions are internally more heterogeneous than standard sorting models predict. We develop a dynamic multi-region model, with fluctuating regional house prices, where an owner-occupying household's location choice depends on its current wealth and its...

Empirical evidence suggests that local jurisdictions are internally more heterogeneous than standard sorting models predict. We develop a dynamic multi-region model, with fluctuating regional house prices, where an owner-occupying household’s location choice depends on its current wealth and...

We show that debt is sustainable at a competitive equilibrium based solely on the reputation for repayment; that is, even without collateral or legal sanctions available to creditors. In an incomplete asset market, when the rate of interest falls recurrently below the rate of growth of the...

This paper proposes an equilibrium theory of nominal exchange rates, which offers a new perspective on various issues in open economy macroeconomics. The nominal exchange rate and portfolio choices are jointly determined in equilibrium, thus providing a new approach to overcoming the...