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The Equilibrium ManifoldPostmodern Developments in the Theory of General Economic Equilibrium$
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Yves Balasko

Print publication date: 2009

Print ISBN-13: 9780262026543

Published to MIT Press Scholarship Online: August 2013

DOI: 10.7551/mitpress/9780262026543.001.0001

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Economic Fluctuations and the Arrow-Debreu Model

Economic Fluctuations and the Arrow-Debreu Model

Chapter:
(p.154) (p.155) 8 Economic Fluctuations and the Arrow-Debreu Model
Source:
The Equilibrium Manifold
Author(s):

Yves Balasko

Publisher:
The MIT Press
DOI:10.7551/mitpress/9780262026543.003.0411

This chapter deals with an extension of the Arrow–Debreu model, namely, the fully stationary intertemporal Arrow–Debreu model where some consumers face restrictions in their ability to transfer wealth between time periods. This extension represents one of the first steps into a genuinely general equilibrium analysis of economic fluctuations. The question here becomes whether a fully stationary model can feature equilibrium solutions that are not stationary. It shows that if there are no restrictions on intertemporal transfers, then all equilibrium solutions are asymptotically stationary, with little room left for fluctuations. However, if some restrictions exist on individual intertemporal transfers, nonstationary equilibrium allocations can exist. The equilibrium manifold approach is used to gain insight on these economies and to assess the role of restrictions in intertemporal wealth transfers in creating or amplifying economic fluctuations.

Keywords:   intertemporal Arrow–Debreu model, equilibrium analysis, economic fluctuations, intertemporal transfers

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