Existence and Uniqueness of Equilibrium in Nonoptimal Unbounded Infinite Horizon Economies
نویسندگان
چکیده
In applied work in macroeconomics and finance, nonoptimal infinite horizon economies are often studied in which the state-space is unbounded. Important examples of such economies are single-sector growth models with production externalities, valued fiat money, monopolistic competition, and/or distortionary government taxation. Although sufficient conditions for existence and uniqueness of Markovian equilibrium are well known for the compact state space case, no similar sufficient conditions exist for unbounded growth. This paper provides such a set of sufficient conditions, and presents a computational algorithm that will prove asymptotically consistent when computing Markovian equilibrium. ∗Corresponding Author: Professor Olivier F. Morand, Department of Economics U-63, University of Connecticut, Storrs, CT 06269, USA; Telephone: 860-486-3546; Fax: 860-4864463; E-mail: [email protected]. Kevin Reffett would like to thank the Tinbergin Institute at Erasmus University, Rotterdam, as will as the Dean’s Excellence in Research Summer Grant Program at Arizona State University for their gracious support of this research.
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