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Sequential Equilibrium in Incomplete Markets with Long-Term Debt

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  • Daniel Jaar

Abstract

This paper proves equilibrium existence in an incomplete market sequential economy with finitely-lived debt contracts. Introducing credit constraints limiting agents' access to liquidity, we show that a competitive equilibrium always exists. Our results are consistent with broad forms of endogenous credit segmentation.

Suggested Citation

  • Daniel Jaar, 2018. "Sequential Equilibrium in Incomplete Markets with Long-Term Debt," Working Papers wp474, University of Chile, Department of Economics.
    • Handle: RePEc:udc:wpaper:wp474
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    References listed on IDEAS

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    1. Aouani, Zaier & Cornet, Bernard, 2009. "Existence of financial equilibria with restricted participation," Journal of Mathematical Economics, Elsevier, vol. 45(12), pages 772-786, December.
    2. Seghir, Abdelkrim & Torres-Martínez, Juan Pablo, 2011. "On equilibrium existence with endogenous restricted financial participation," Journal of Mathematical Economics, Elsevier, vol. 47(1), pages 37-42, January.
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    5. Fatih Guvenen, 2009. "A Parsimonious Macroeconomic Model for Asset Pricing," Econometrica, Econometric Society, vol. 77(6), pages 1711-1750, November.
    6. 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.
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