Information, heterogeneity and market incompleteness
نویسندگان
چکیده
Information is “market-consistent” if agents only use market prices to infer the underlying states of the economy. This paper applies this concept to a stochastic growth model with incomplete markets and heterogeneous agents. The economy with market-consistent information can never replicate the full information equilibrium, and there are substantial differences in impulse responses to aggregate productivity shocks. These results are robust to the introduction of a noisy public signal and aggregate financial markets. We argue that the principle of marketconsistent information should be applied to any model with incomplete markets. JEL classification: D52; D84; E32.
منابع مشابه
The Impact of International Migration on the Economy with the Assumption of Labor Heterogeneity
T his study investigated the effect of international labor migration on Iran’s economy using a neo-classical growth model with the assumption of labor heterogeneity within the framework of dynamic stochastic general equilibrium model. After solving the model, the obtained equations were linearized and different values were assigned to the parameters according to Iran’s economy inform...
متن کاملThe role of incompleteness in commodity futures markets
This paper proposes a convenience yield-based pricing for commodity futures, which embeds incompleteness of commodity futures markets in convenience yields. By using the pricing method, we conduct empirical analyses of the prices of WTI crude oil, heating oil, and natural gas futures traded on the NYMEX in order to assess the incompleteness of energy futures markets. We show that the fluctuatio...
متن کاملThe hidden costs of tax evasion.: Collaborative tax evasion in markets for expert services
In markets where transactions are governed by contractual incompleteness, revealed intentions to evade taxes may affect market performance. We experimentally examine the impact of tax evasion attempts on the performance of credence goods markets, where contractual incompleteness results from asymmetric information on the welfare maximizing quality of the good. We find that tax evasion attempts ...
متن کاملPooling and endogenous market incompleteness
We study a financial market economy with a continuum of borrowers and pooling of borrowers’ promises. Under these conditions and in the absence of designing costs, utility-maximizing decisions of price-taking borrowersmay lead to financial market incompleteness. Parametrizing equilibria through the borrowers’ no-arbitrage beliefs, we link expectations to the financial market structure. Markets ...
متن کاملMarket Incompleteness in Regional Electricity Transmission
The paper analyses various proposals for the organization of regional electricity transmission in terms of the market incompleteness that they may implicitly assume. Elementary notions of variational inequalities constitute the analytical tool used throughout the paper. The discussion is conducted with reference to the flow gate debate in California and European proposals for the organization o...
متن کامل