Anything Goes Theorem, Incomplete Markets and Ricardian Equivalence Hypothesis

21 Pages Posted: 21 Nov 2017

Date Written: November 18, 2017

Abstract

In this paper, Anything Goes: The Sonnenschein-Mantel-Debreu theorem (following the work of Sonnenchein (1972, 1973), Mantel (1974), and Debreu (1974)), has been applied to incomplete markets, Bottazzi, J.-M. and T. Hens (1996), in order to test the Ricardian equivalence hypothesis. In the naïve economic environment where public debt has a perfect substitute in lump-sum taxes the RET fails if one allows payoff matrix of economic agents to vary. If the law of one price does not apply (if any two portfolios have equal payoffs than their prices should be equal too) and that the payoffs are risk free.

Keywords: Anything Goes, RET Hypothesis, Incomplete Markets, Equilibrium

JEL Classification: C62, D50

Suggested Citation

Josheski, Dushko, Anything Goes Theorem, Incomplete Markets and Ricardian Equivalence Hypothesis (November 18, 2017). Available at SSRN: https://ssrn.com/abstract=3073568 or http://dx.doi.org/10.2139/ssrn.3073568

Dushko Josheski (Contact Author)

University Goce Delcev ( email )

Stip
Macedonia
+389 32 550 000 (Phone)
+389 32 390 700 (Fax)

HOME PAGE: http://www.ugd.edu.mk/

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
44
Abstract Views
420
PlumX Metrics