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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Abstract/Index
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 [10]) 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 |
| Deposited On: | 17 Dec 2010 14:45 |
| Last Modified: | 17 Dec 2010 14:45 |
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- Asset Prices, Debt Constraints and Inefficiency. (deposited 28 Oct 2009 11:22)
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