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Abstract

The rapidly growing field called ‘general equilibrium with incomplete markets’ (GEI) has already made fundamental contributions in three different areas of economic theory. First, it has thrown up math ematical problems so delicate that they have forced economists for the first time to abandon that old war-horse—Brouwer’s fixed point theorem—and to invent (or borrow from mathematics) a new methodology for constructing existence proofs for general equilib rium. Second, it has demonstrated a significant difference between real and financial assets. Third, it has, to my mind, greatly increased the presumption against Pareto efficiency of the market process. The model appears to be flexible and rich enough to include many of the fundamental paradigms of finance and macroeconomics.

Keywords

  • General Equilibrium
  • Financial Asset
  • Incomplete Market
  • Pareto Efficiency
  • Perfect Competition

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References

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  • Lucas, R. E., Jr (1980) ‘Equilibrium in a Pure Currency Economy,’ in J. H. Karaken and N. Wallace (eds) Models of Monetary Economies (Minneapolis, MN: Federal Reserve Bank of Minneapolis).

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  • Svensson, L. E. (1985) ‘Money and Asset Prices in a Cash-in-Advance Economy,’ Journal of Political Economy, vol. 93, pp. 919–44.

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© 1991 International Economic Association

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Geanakoplos, J. (1991). Comment. In: McKenzie, L.W., Zamagni, S. (eds) Value and Capital: Fifty Years Later. International Economic Association Series. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-11029-2_9

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