Asset Prices, Debt Constraints and Inefficiency
Bloise, Gaetano and Reichlin, Pietro (2008) Asset Prices, Debt Constraints and Inefficiency. [Working Paper]. p. 26. Departmental Working Papers of Economics (No. 0089).
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In this paper, we consider economies with (possibly endogenous) solvency constraints under uncertainty. Constrained ine±ciency corresponds to a feasible redistribution yielding a welfare improvement beginning from every contingency reached by the economy. A sort of Cass Criterion (Cass ) completely characterizes constrained inefficiency. This criterion involves only observable prices and requires low interest rates in the long-run, exactly as in economies with overlapping generations. In addition, when quantitative limits to liabilities arise from participation constraints, a feasible welfare improvement, subject to participation, coincides with the introduced notion of constrained inefficiency.
|Item Type:||Report / Paper (Working Paper)|
|Research documents and activity classification:||Working Papers > Non-Refereed Working Papers / of national relevance only|
|Divisions:||Department of Business and Management|
|Uncontrolled Keywords:||Private debt; solvency constraints; default; Cass Criterion; asset.|
|MIUR Scientific Area:||Area 13 - Economics and Statistics > SECS-P/01 Political Economy|
|Deposited by:||Maria Teresa Nistico|
|Date Deposited:||17 Dec 2010 13:45|
|Last Modified:||21 Apr 2015 23:14|
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Asset Prices, Debt Constraints and Inefficiency. (deposited 28 Oct 2009 10:22)
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