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Equilibrium with default-dependent credit constraints

Author

Listed:
  • Emma Moreno Garcia
  • Juan Pablo Torres-Martinez

    (Department of Economics, PUC-Rio)

Abstract

We state an infinite horizon sequential markets model with real assets in positive net supply and subject to credit risk. By introducing default-dependent borrowing constraints, we show the existence of equilibrium.

Suggested Citation

  • Emma Moreno Garcia & Juan Pablo Torres-Martinez, 2007. "Equilibrium with default-dependent credit constraints," Textos para discussão 540, Department of Economics PUC-Rio (Brazil).
    • Handle: RePEc:rio:texdis:540
    as

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    File URL: http://www.econ.puc-rio.br/uploads/adm/trabalhos/files/td540.pdf
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    References listed on IDEAS

    as
    1. Magill, Michael & Quinzii, Martine, 1994. "Infinite Horizon Incomplete Markets," Econometrica, Econometric Society, vol. 62(4), pages 853-880, July.
    2. Magill, Michael & Quinzii, Martine, 1996. "Incomplete markets over an infinite horizon: Long-lived securities and speculative bubbles," Journal of Mathematical Economics, Elsevier, vol. 26(1), pages 133-170.
    3. Levine, David K. & Zame, William R., 1996. "Debt constraints and equilibrium in infinite horizon economies with incomplete markets," Journal of Mathematical Economics, Elsevier, vol. 26(1), pages 103-131.
    4. Braido, Luis H.B., 2008. "Trading constraints penalizing default: A recursive approach," Journal of Mathematical Economics, Elsevier, vol. 44(2), pages 157-166, January.
    5. Hernandez D., Alejandro & Santos, Manuel S., 1996. "Competitive Equilibria for Infinite-Horizon Economies with Incomplete Markets," Journal of Economic Theory, Elsevier, vol. 71(1), pages 102-130, October.
    6. Páscoa, Mário Rui & Seghir, Abdelkrim, 2009. "Harsh default penalties lead to Ponzi schemes," Games and Economic Behavior, Elsevier, vol. 65(1), pages 270-286, January.
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    Keywords

    Equilibrium; Infinite horizon incomplete markets; Infinite-lived real assets.;
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