IFS-STICERD Public Economics Seminar
Price Theory for Incomplete Markets
Alan Olivi (MIT), joint with with Emmanuel Farhi and Ivan Werning
Wednesday 16 June 2021 16:30 - 17:30
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About this event
In this paper, we derive formulas expressing the elasticity of individual consumption to changes in current and future interest rates and income in incomplete market models. We generalize the existing price theory formulas in complete market models with a single inter-temporal budget constraint. Our characterization relies on two state price densities capturing the welfare and precautionary effects of income and price changes. It provides a natural decomposition of consumption responses with structural interpretation. We quantitatively show that these new statistics matter significantly to understand aggregate demand in incomplete markets, beyond the impact of heterogeneous marginal propensities to consume.
This seminar series is jointly organized by the IFS and STICERD.
IFS-STICERD Public Economics seminars are held on Wednesdays in term time at 12.30-13.45 IN PERSON at the IFS.
Seminar organisers: Stuart Adam (IFS), Monica Costa Dias (IFS), Xavier Jaravel (LSE), Camille Landais (LSE), Attila Lindner (UCL), Joana Naritomi (LSE), and Johannes Spinnewijn (LSE).
For further information please contact Sadia Ali: firstname.lastname@example.org.
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