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| Author: | Dutta, J. Polemarchakis, H. |
| Title: | Asset markets and equilibrium processes |
| Journal: | Review of Economic Studies
1990 : APR, VOL. 57:2, p. 229-254 |
| Index terms: | ASSETS MARKETS EQUILIBRIUM ANALYSIS MONETARY ECONOMICS PRICES OUTPUT |
| Language: | eng |
| Abstract: | The failure of the asset market to be complete causes serial dependence in output and prices which is suboptimal. An economy is considered with white noise shocks. When the asset market is complete, an optimal, competitive allocation inherits this strong stationarity. When the asset market is only sequentially complete, prices and output necessarily display serial dependence at equilibrium. The further incompleteness of a monetary economy explains co-movements in real and nominal variables. |
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