A Simple Model of Useless Speculation

The paper presents a general equilibrium model of a pure exchange economy with stochastic endowment in which speculation is profitable and stabilizes prices, but is useless from a welfare point of view. Reconciling the Siegel paradox with the theory of incomplete markets we show that banning speculation by closing the forward exchange market may increase social welfare.

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Year of publication:	1990-11
Authors:	Sinn, Hans-Werner ; Kemp, Murray C.
Institutions:	National Bureau of Economic Research (NBER)

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Extent:	application/pdf
Series:	NBER Working Papers.
Type of publication:	Book / Working Paper
Notes:	ITI IFM published as C and S working Paper , December 1995, Japanese Economic Review 51, (2000), pp. 85-95. Number 3513
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005830290