The Structure of the Set of Sunspot Equilibria in Economies with Incomplete Financial Markets.

This paper considers the set of equilibria of two-period, sunspot economies with "S" purely extrinsic states of nature in the second period and "I" assets with linearly independent nominal payoffs. The span of the payoff matrix contains the vector [1, . . . ,1] (i.e., inside money). The set of economies is described in terms of (sunspot-invariant) utility functions. If "S" > "I" > O, there is an open, dense set of economies such that, given a vector of no arbitrage asset prices, the set of equilibrium allocations contains a smooth manifold of dimension "S"-"I". Such a manifold contains at least one nonsunspot equilibrium (and at most a finite number of such equilibria).