On the Existence and Uniqueness of Stationary Equilibrium in Bewley Economies with Production

Acikgoz, Omer (2015): On the Existence and Uniqueness of Stationary Equilibrium in Bewley Economies with Production.

Abstract

I prove existence of stationary recursive competitive equilibrium in Bewley economies with production under specifications in which (i) utility function is allowed to be unbounded, and (ii) the underlying discrete idiosyncratic productivity process can take any form, aside from mild restrictions. Some of the intermediate results provide theoretical basis for assumptions often made in the quantitative macroeconomics literature. By providing an example, I illustrate that equilibrium is not necessarily unique, even under typical specifications of the model, and discuss the underlying reasons for multiplicity.

• Item Type: MPRA Paper
• Language: English
• Keywords: Recursive Competitive Equilibrium, Bewley/Huggett/Aiyagari model, Existence, Uniqueness
• Subjects: C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C62 - Existence and Stability Conditions of Equilibrium; E - Macroeconomics and Monetary Economics > E0 - General > E00 - General; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E21 - Consumption ; Saving ; Wealth

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