Pub Date : 2021-01-01DOI: 10.22812/JETEM.2021.32.1.004
Jong-suk Han, Sun-Bin Kim, Chang, Yongsung
As the Earned Income Tax Credit(EITC) massively expanded in 2019, 20% of total households benefit from the credit. Due to this large reform, we expect that any future reform will also largely affect the aggregate economy; thus, the heterogeneous agent life cycle dynamic stochastic general equilibrium (HA-LC-DSGE) model will be widely used in future research. This paper reviews the EITC reforms in Korea since the first implementation and surveys the previous studies, examining the labor supply effects. We address why the HA-LC-DSGE model is necessary to examine the current EITC system in Korea. Then, we provide an example of the HA-LC-DSGE model with a policy simulation of the EITC expansion and explain the model's salient ingredients to understand the results.
{"title":"Earned Income Tax Credit and Heterogenous Agent Dynamic Stochastic General Equilibrium Model","authors":"Jong-suk Han, Sun-Bin Kim, Chang, Yongsung","doi":"10.22812/JETEM.2021.32.1.004","DOIUrl":"https://doi.org/10.22812/JETEM.2021.32.1.004","url":null,"abstract":"As the Earned Income Tax Credit(EITC) massively expanded in 2019, 20% of total households benefit from the credit. Due to this large reform, we expect that any future reform will also largely affect the aggregate economy; thus, the heterogeneous agent life cycle dynamic stochastic general equilibrium (HA-LC-DSGE) model will be widely used in future research. This paper reviews the EITC reforms in Korea since the first implementation and surveys the previous studies, examining the labor supply effects. We address why the HA-LC-DSGE model is necessary to examine the current EITC system in Korea. Then, we provide an example of the HA-LC-DSGE model with a policy simulation of the EITC expansion and explain the model's salient ingredients to understand the results.","PeriodicalId":39995,"journal":{"name":"Journal of Economic Theory and Econometrics","volume":"32 1","pages":"80-115"},"PeriodicalIF":0.0,"publicationDate":"2021-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"68342359","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-01-01DOI: 10.22812/JETEM.2021.32.1.001
Hyung Sun Yim, Seong‐Hoon Cho, Byeongseon Seo
This paper investigates the impact of air quality pollution on respiratory health risk in Korea. In particular, we consider transboundary effects of particulate matter (PM10) on the health risk of pneumonia by using the spatial panel model. PM10, generated by natural phenomena and anthropogenic activities, migrates to neighboring areas contributing to not only local but also ambient regional health risks. We employ the spatial panel model to explain the spillover effects of air pollution on the respiratory health risk. The panel data covers environmental, demographic and economic variables that are associated with pneumonia of 120 local districts in Korea during the period from 2010 to 2015. Empirical evidence based on non-spatial and spatial models commonly indicates that the impact of air pollution on pneumonia-related risk is significant. The spatial panel model assessment reveals improvement in explanation and evidences more significant effect of ambient air pollution on pneumonia related hospital visits. As such, evidences of spatial dependence and borderless impacts of air pollution on the health risk of pneumonia are found to be strong. We also investigate the spatial dynamics of the potential association between air pollution and respiratory diseases with respect to variations in wind direction by extending the conventional weight matrix specification. Empirical results imply that transboundary effects of PM10 on health risk are stronger for districts located downwind from Northwest districts than from other directions.
{"title":"Impacts of Ambient Air Pollution on Health Risk in Korea: A Spatial Panel Model Assessment","authors":"Hyung Sun Yim, Seong‐Hoon Cho, Byeongseon Seo","doi":"10.22812/JETEM.2021.32.1.001","DOIUrl":"https://doi.org/10.22812/JETEM.2021.32.1.001","url":null,"abstract":"This paper investigates the impact of air quality pollution on respiratory health risk in Korea. In particular, we consider transboundary effects of particulate matter (PM10) on the health risk of pneumonia by using the spatial panel model. PM10, generated by natural phenomena and anthropogenic activities, migrates to neighboring areas contributing to not only local but also ambient regional health risks. We employ the spatial panel model to explain the spillover effects of air pollution on the respiratory health risk. The panel data covers environmental, demographic and economic variables that are associated with pneumonia of 120 local districts in Korea during the period from 2010 to 2015. Empirical evidence based on non-spatial and spatial models commonly indicates that the impact of air pollution on pneumonia-related risk is significant. The spatial panel model assessment reveals improvement in explanation and evidences more significant effect of ambient air pollution on pneumonia related hospital visits. As such, evidences of spatial dependence and borderless impacts of air pollution on the health risk of pneumonia are found to be strong. We also investigate the spatial dynamics of the potential association between air pollution and respiratory diseases with respect to variations in wind direction by extending the conventional weight matrix specification. Empirical results imply that transboundary effects of PM10 on health risk are stronger for districts located downwind from Northwest districts than from other directions.","PeriodicalId":39995,"journal":{"name":"Journal of Economic Theory and Econometrics","volume":"32 1","pages":"1-24"},"PeriodicalIF":0.0,"publicationDate":"2021-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"68342346","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2020-09-30DOI: 10.22812/JETEM.2020.31.3.004
Tack Yun
{"title":"Macroeconomic Changes since 2000 and DSGE Models","authors":"Tack Yun","doi":"10.22812/JETEM.2020.31.3.004","DOIUrl":"https://doi.org/10.22812/JETEM.2020.31.3.004","url":null,"abstract":"","PeriodicalId":39995,"journal":{"name":"Journal of Economic Theory and Econometrics","volume":"31 1","pages":"71-118"},"PeriodicalIF":0.0,"publicationDate":"2020-09-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"41655668","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2020-06-01DOI: 10.22812/JETEM.2020.31.2.003
Seonghoon Cho
The natural rate of interest is the real interest rate that would prevail when the macro economy is in its natural, long-term equilibrium at which the actual GDP growth rate equals its potential rate. The natural rate of interest should therefore comove with the long-term trend of the potential GDP growth. In addition, since monetary policy authority has a significant impact on real interest rates, the difference between real and natural interest rates can be the basis for determining the long-term policy stance for the real sector of the economy. This study estimates potential growth rates and natural interest rates in Korea and the United States based on the Holston et al. (2017) model with important adjustments. We use the real market interest rate faced by economic agents, which may be different from the traditional real rate computed using the policy rate. Also, GDP per capita is considered, which is theoretically more suitable when population growth is taken into account. The estimation results using these new measures and the associated adjustment in the model reveal that the estimated natural rate of interest captures the theoretical characteristics of the natural interest rate better than the estimate using standard real interest rate. In addition, since the 2000s, Korea's real rate was much lower than the estimated natural interest rate, suggesting that the long-term monetary policy stance in Korea might have been strongly accommodating.
自然利率是指宏观经济处于实际GDP增长率等于潜在增长率的自然长期均衡状态时的实际利率。因此，自然利率应与潜在GDP增长的长期趋势一致。此外，由于货币政策权威对实际利率有重大影响，因此实际利率与自然利率之间的差异可以作为确定实体经济部门长期政策立场的基础。本研究基于Holston et al.(2017)模型估算韩国和美国的潜在增长率和自然利率，并进行了重要调整。我们使用经济主体面临的实际市场利率，这可能与传统的使用政策利率计算的实际利率不同。此外，考虑人均GDP，这在理论上更适合考虑人口增长。使用这些新测度的估计结果和模型中的相关调整表明，估计的自然利率比使用标准实际利率的估计更能捕捉自然利率的理论特征。此外，自2000年代以来，韩国的实际利率远低于估计的自然利率，这表明韩国的长期货币政策立场可能是非常宽松的。
{"title":"Natural Interest Rate, Potential GDP Growth Rate and Long-Term Monetary Policy Stance","authors":"Seonghoon Cho","doi":"10.22812/JETEM.2020.31.2.003","DOIUrl":"https://doi.org/10.22812/JETEM.2020.31.2.003","url":null,"abstract":"The natural rate of interest is the real interest rate that would prevail when the macro economy is in its natural, long-term equilibrium at which the actual GDP growth rate equals its potential rate. The natural rate of interest should therefore comove with the long-term trend of the potential GDP growth. In addition, since monetary policy authority has a significant impact on real interest rates, the difference between real and natural interest rates can be the basis for determining the long-term policy stance for the real sector of the economy. This study estimates potential growth rates and natural interest rates in Korea and the United States based on the Holston et al. (2017) model with important adjustments. We use the real market interest rate faced by economic agents, which may be different from the traditional real rate computed using the policy rate. Also, GDP per capita is considered, which is theoretically more suitable when population growth is taken into account. The estimation results using these new measures and the associated adjustment in the model reveal that the estimated natural rate of interest captures the theoretical characteristics of the natural interest rate better than the estimate using standard real interest rate. In addition, since the 2000s, Korea's real rate was much lower than the estimated natural interest rate, suggesting that the long-term monetary policy stance in Korea might have been strongly accommodating.","PeriodicalId":39995,"journal":{"name":"Journal of Economic Theory and Econometrics","volume":"31 1","pages":"40-69"},"PeriodicalIF":0.0,"publicationDate":"2020-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"68342493","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2020-06-01DOI: 10.22812/JETEM.2020.31.2.002
Sei WanKim, JinillKim, JungsooPark
This work empirically investigates how commercial banks' aggregate credit supply is associated with business cycle over different regimes of the Korean economy. Linear empirical models employed in most of previous studies are subject to a potential missapecification problem because it is well known that both real GDP and credit supply reveal different dynamic properties over different regimes. This work finds that credit supply has asymmetric effect on business cycle for expansion and contraction phases when the Smooth Transition Autoregressive Vector Error Correction Model (or STAR-VECM) is employed. Our empirical findings are as follows. Firstly, we find that credit supply has procyclical effect on real GDP in all phases. Secondly, the procyclical effects are significantly intensified especially in contractionary phases which indicates asymmetry of its effect. In sum, this result supports 'Credit Acceleration Hypothesis' of Bernanke et al. (1999). Lastly, we further find that real GDP has asymmetric effects on banks' credit supply with countercyclical effect on expansionary regimes.
{"title":"Does Credit Supply Accelerate Business Cycle Changes in Korea?: Some New Evidence by Incorporating Regime Changes","authors":"Sei WanKim, JinillKim, JungsooPark","doi":"10.22812/JETEM.2020.31.2.002","DOIUrl":"https://doi.org/10.22812/JETEM.2020.31.2.002","url":null,"abstract":"This work empirically investigates how commercial banks' aggregate credit supply is associated with business cycle over different regimes of the Korean economy. Linear empirical models employed in most of previous studies are subject to a potential missapecification problem because it is well known that both real GDP and credit supply reveal different dynamic properties over different regimes. This work finds that credit supply has asymmetric effect on business cycle for expansion and contraction phases when the Smooth Transition Autoregressive Vector Error Correction Model (or STAR-VECM) is employed. Our empirical findings are as follows. Firstly, we find that credit supply has procyclical effect on real GDP in all phases. Secondly, the procyclical effects are significantly intensified especially in contractionary phases which indicates asymmetry of its effect. In sum, this result supports 'Credit Acceleration Hypothesis' of Bernanke et al. (1999). Lastly, we further find that real GDP has asymmetric effects on banks' credit supply with countercyclical effect on expansionary regimes.","PeriodicalId":39995,"journal":{"name":"Journal of Economic Theory and Econometrics","volume":"31 1","pages":"19-39"},"PeriodicalIF":0.0,"publicationDate":"2020-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46948744","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2020-03-31DOI: 10.22812/JETEM.2020.31.1.003
이재득
This paper analyzes the recent realized volatility and jump of US Dollar/Euro and UK Pound/Euro returns using the high frequency five minute with the nonparametric estimation during years 2010-2018 including year 2016 of UK's national vote of Brexit. The empirical results show that before Brexit vote in year 2016 the Bipower volatilities of US Dollar/Euro and UK Pound/Euro returns have the time dependence effects such as daily and monthly effects, but they do not have weekly effects. But, they have asymmetrical properties on real rate of returns. However, after Brexit vote in year 2016 Bipower volatilities of US Dollar/Euro and UK Pound/Euro returns have only daily effects, but they do not have weekly and monthly effects. Furthermore, they do not have asymmetrical properties on real rate of returns. Before Brexit vote in year 2016, the Bipower jumps of US Dollar/Euro returns were not affected by the previous jumps and they do not have asymmetrical properties. Before Brexit vote in year 2016, Bipower jumps of UK Pound/Euro returns were not affected by the previous rates of returns, but after Brexit vote, jumps of UK Pound/Euro returns were affected by the previous rates of returns. Jumps of UK Pound/Euro returns do not have asymmetrical effects of previous rates of returns and jumps.
{"title":"Brexit and Time Dependence and Asymmetry of Dollar-Euro and Pound-Euro Exchange Rates","authors":"이재득","doi":"10.22812/JETEM.2020.31.1.003","DOIUrl":"https://doi.org/10.22812/JETEM.2020.31.1.003","url":null,"abstract":"This paper analyzes the recent realized volatility and jump of US Dollar/Euro and UK Pound/Euro returns using the high frequency five minute with the nonparametric estimation during years 2010-2018 including year 2016 of UK's national vote of Brexit. \u0000The empirical results show that before Brexit vote in year 2016 the Bipower volatilities of US Dollar/Euro and UK Pound/Euro returns have the time dependence effects such as daily and monthly effects, but they do not have weekly effects. But, they have asymmetrical properties on real rate of returns. However, after Brexit vote in year 2016 Bipower volatilities of US Dollar/Euro and UK Pound/Euro returns have only daily effects, but they do not have weekly and monthly effects. Furthermore, they do not have asymmetrical properties on real rate of returns. \u0000Before Brexit vote in year 2016, the Bipower jumps of US Dollar/Euro returns were not affected by the previous jumps and they do not have asymmetrical properties. Before Brexit vote in year 2016, Bipower jumps of UK Pound/Euro returns were not affected by the previous rates of returns, but after Brexit vote, jumps of UK Pound/Euro returns were affected by the previous rates of returns. Jumps of UK Pound/Euro returns do not have asymmetrical effects of previous rates of returns and jumps.","PeriodicalId":39995,"journal":{"name":"Journal of Economic Theory and Econometrics","volume":"31 1","pages":"66-96"},"PeriodicalIF":0.0,"publicationDate":"2020-03-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48866813","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2020-03-31DOI: 10.22812/JETEM.2020.31.1.002
Jin Park, Jaeok Park
Recently, the Korean government is promoting the joint recruitment of public institutions, in which public institutions performing a similar task set a common date of written tests for entry-level employment. In this study, we analyze the effects of this policy on job seekers and institutions. Using a game-theoretic model with two institutions and a continuum of job seekers, we obtain the following results. First, when job seekers’ preferences for the two institutions are identical and one institution is much preferred to the other one, the less preferred institution and job seekers suffer from joint recruitment because job opportunities at the less preferred institution are not fully utilized under joint recruitment. On the other hand, when each institution is preferred by a half of job seekers, joint recruitment improves the overall utility of job seekers by increasing the likelihood that job seekers enter their preferred institutions. If joint recruitment lowers the overall difficulty of getting a job, it benefits job seekers with low ability more than those with high ability. Based on these results, we evaluate the policy of joint recruitment and discuss policy alternatives.
{"title":"Joint Recruitment of Public Institutions: Who Gains and Who Loses?","authors":"Jin Park, Jaeok Park","doi":"10.22812/JETEM.2020.31.1.002","DOIUrl":"https://doi.org/10.22812/JETEM.2020.31.1.002","url":null,"abstract":"Recently, the Korean government is promoting the joint recruitment of public institutions, in which public institutions performing a similar task set a common date of written tests for entry-level employment. In this study, we analyze the effects of this policy on job seekers and institutions. Using a game-theoretic model with two institutions and a continuum of job seekers, we obtain the following results. First, when job seekers’ preferences for the two institutions are identical and one institution is much preferred to the other one, the less preferred institution and job seekers suffer from joint recruitment because job opportunities at the less preferred institution are not fully utilized under joint recruitment. On the other hand, when each institution is preferred by a half of job seekers, joint recruitment improves the overall utility of job seekers by increasing the likelihood that job seekers enter their preferred institutions. If joint recruitment lowers the overall difficulty of getting a job, it benefits job seekers with low ability more than those with high ability. Based on these results, we evaluate the policy of joint recruitment and discuss policy alternatives.","PeriodicalId":39995,"journal":{"name":"Journal of Economic Theory and Econometrics","volume":"76 6","pages":"14-65"},"PeriodicalIF":0.0,"publicationDate":"2020-03-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"41290808","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2020-01-01DOI: 10.22812/JETEM.2020.31.4.003
Seong Yeon Chang
This study examines the time series characteristics of residential electricity demand and its determinants in Korea and the short-run and long-run relationship among them. We employ unit root tests, cointegration, and error-correction models on annual time series for the period 1972--2019. The rapid development of Korea over this period provides clear evidence of the possibility of structural breaks. We find that residential electricity demand and its determinants are trend-stationary processes with a slope change, which implies that there is no need to invoke cointegration methods under the unit root assumption. We expect that the essential modeling strategy presented in this article will be widely applicable.
{"title":"Estimation of Residential Electricity Demand in Korea Allowing for a Structural Break","authors":"Seong Yeon Chang","doi":"10.22812/JETEM.2020.31.4.003","DOIUrl":"https://doi.org/10.22812/JETEM.2020.31.4.003","url":null,"abstract":"This study examines the time series characteristics of residential electricity demand and its determinants in Korea and the short-run and long-run relationship among them. We employ unit root tests, cointegration, and error-correction models on annual time series for the period 1972--2019. The rapid development of Korea over this period provides clear evidence of the possibility of structural breaks. We find that residential electricity demand and its determinants are trend-stationary processes with a slope change, which implies that there is no need to invoke cointegration methods under the unit root assumption. We expect that the essential modeling strategy presented in this article will be widely applicable.","PeriodicalId":39995,"journal":{"name":"Journal of Economic Theory and Econometrics","volume":"31 1","pages":"69-85"},"PeriodicalIF":0.0,"publicationDate":"2020-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"68342280","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2020-01-01DOI: 10.22812/JETEM.2020.31.1.004
S. Choi
Transition probability density function (TPDF) or log-TPDF of a diffusion is quite useful in many ways. For example, it can be employed not only to estimate a diffusion by the maximum likelihood estimation but also to simulate data from a diffusion or to price an asset when the underlying process follows a diffusion. However, unfortunately, the true TPDF of a diffusion is unknown with a few exceptions in general. Starting from Ait-Sahalia (2002)'s pioneering work on approximate but explicit TPDF of a univariate time-homogeneous diffusion to Choi (2019a)'s recent work on closed-form approximate TPDF of a multivariate time-inhomogeneous jump diffusion, several researchers have subsequently established the way to approximate the TPDFs or log-TPDFs of more general diffusion models. This article explains how people have resolved problems to generalize the method from Ait-Sahalia(2002)'s paper to Choi(2013, 2015)'s multivariate time-inhomogeneous diffusions. Due to space constraints, explanations of detailed theories or assumptions for their proof are reduced to the minimum and we show important results, with tacit facts not described in the original papers. In addition, we also introduce papers derived from and related to those key studies.
{"title":"Recent Development of Closed-form Approximate (Log-)Transition Probability Density Functions of Diffusion Processes","authors":"S. Choi","doi":"10.22812/JETEM.2020.31.1.004","DOIUrl":"https://doi.org/10.22812/JETEM.2020.31.1.004","url":null,"abstract":"Transition probability density function (TPDF) or log-TPDF of a diffusion is quite useful in many ways. For example, it can be employed not only to estimate a diffusion by the maximum likelihood estimation but also to simulate data from a diffusion or to price an asset when the underlying process follows a diffusion. However, unfortunately, the true TPDF of a diffusion is unknown with a few exceptions in general. Starting from Ait-Sahalia (2002)'s pioneering work on approximate but explicit TPDF of a univariate time-homogeneous diffusion to Choi (2019a)'s recent work on closed-form approximate TPDF of a multivariate time-inhomogeneous jump diffusion, several researchers have subsequently established the way to approximate the TPDFs or log-TPDFs of more general diffusion models. This article explains how people have resolved problems to generalize the method from Ait-Sahalia(2002)'s paper to Choi(2013, 2015)'s multivariate time-inhomogeneous diffusions. Due to space constraints, explanations of detailed theories or assumptions for their proof are reduced to the minimum and we show important results, with tacit facts not described in the original papers. In addition, we also introduce papers derived from and related to those key studies.","PeriodicalId":39995,"journal":{"name":"Journal of Economic Theory and Econometrics","volume":"31 1","pages":"97-152"},"PeriodicalIF":0.0,"publicationDate":"2020-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"68342456","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2020-01-01DOI: 10.22812/JETEM.2020.31.4.001
Won Dong Chul, Hahn Guangsug
Redundant assets give rise to peculiar portfolios, called `link portfolios,' under portfolio constraints. Link portfolios are jointly spanned by constrained null-income portfolios and form a linear subspace. The paper provides a general methodology for showing the existence of equilibrium under portfolio constraints by building two theoretical pillars to deal with link portfolios. The two pillars consist of the fundamental theorem of portfolio decomposition and the allocational equivalence between the original economy and the artificial economy built from projecting away link portfolios from the portfolio constraints. Investigating the existence of equilibrium in constrained financial markets boils down to finding a sufficient condition for the fundamental theorem of portfolio constraints to hold. The sufficient condition of the paper is general enough to encompass other sufficient conditions of the literature.
{"title":"Equilibrium in Constrained Financial Markets","authors":"Won Dong Chul, Hahn Guangsug","doi":"10.22812/JETEM.2020.31.4.001","DOIUrl":"https://doi.org/10.22812/JETEM.2020.31.4.001","url":null,"abstract":"Redundant assets give rise to peculiar portfolios, called `link portfolios,' under portfolio constraints. Link portfolios are jointly spanned by constrained null-income portfolios and form a linear subspace. The paper provides a general methodology for showing the existence of equilibrium under portfolio constraints by building two theoretical pillars to deal with link portfolios. The two pillars consist of the fundamental theorem of portfolio decomposition and the allocational equivalence between the original economy and the artificial economy built from projecting away link portfolios from the portfolio constraints. Investigating the existence of equilibrium in constrained financial markets boils down to finding a sufficient condition for the fundamental theorem of portfolio constraints to hold. The sufficient condition of the paper is general enough to encompass other sufficient conditions of the literature.","PeriodicalId":39995,"journal":{"name":"Journal of Economic Theory and Econometrics","volume":"31 1","pages":"1-40"},"PeriodicalIF":0.0,"publicationDate":"2020-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"68342629","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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