THREE ESSAYS IN ECONOMIC THEORY (LIQUIDITY CONSTRAINT, INCOMPLETE MARKETS, SHORT-RUN CORE)
This dissertation is composed of three independent essays in economic theory. In the first essay, a pure exchange model where households face liquidity constraints because of the incomplete nature of the financial system is analyzed. Some properties of the equilibrium correspondence which maps government policies into sets of competitive equilibria are investigated, and the analogue of the First Welfare Theorem in the traditional general equilibrium theory is established. The interest rate is interpreted as the social price devised to allocate the limited supply of money efficiently on the one hand, and as the rate of indirect tax on certain commodity trades on the other. In the second essay, the existence of competitive equilibrium is proved for a model with incomplete futures markets. The security returns in this model are denominated in terms of units which represent certain composite commodities specific to events. The third essay establishes the equality between the set of competitive equilibrium allocations and the set of allocations which belong to the cores of a sequence of short run economies for an overlapping generations model. A short run economy is an economy with a finite number of periods obtained by truncating the original economy so that the truncated economy is irreducible.
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