文章基本信息

标题：Promises Promises"
本地全文：下载
作者：Geanakoplos, John
期刊名称：COWLES Foundation Discussion Paper / Cowles Foundation for Research in Economics
出版年度：1996
卷号：1996
期号：1
出版社：Yale University
摘要：In the classical general equilibrium model, agents keep all their promises, every good is traded, and competition prevents any agent from earning superior returns on investments in financial markets. In this paper I introduce the age-old problem of broken promises into the general equilibrium model, and I find that a new market dynamic emerges. Given the legal system and institutions, market forces of supply and demand will establish the collateral levels which are required to secure promises. Since physical collateral will typically be scarce, these collateral levels will be set so low that there is bound to be some default. Many kinds of promises will not be traded, because that also economizes on collateral. Scarce collateral thus creates a mechanism for determining endogenously which assets will be traded, thereby helping to resolve a long standing puzzle in general equilibrium theory. Finally, I shall show that under suitable conditions, in rational expectations equilibrium, some investors will be able to earn higher than normal returns on their investments. The legal system, in conjunction with the market, will be under constant pressure to expand the potential sources of collateral. This will lead to market innovation. I illustrate the theoretical points in this paper with some of my experiences on Wall Street as director of fixed income research at the firm of Kidder Peabody.