General financial equilibrium with policy interventions: A variational inequality approach

General financial equilibrium with policy interventions: A variational inequality approach

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Article ID: iaor1994805
Country: Switzerland
Volume: 44
Issue: 1/4
Start Page Number: 227
End Page Number: 241
Publication Date: Oct 1993
Journal: Annals of Operations Research
Authors:
Keywords: programming: mathematical, networks
Abstract:

In this paper a model of general financial equilibrium with policy interventions is introduced, which yields the optimal composition of assets and liabilities in each sector’s portfolio, as well as the market prices for each instrument. The policy interventions considered are taxes and price ceilings. The variational inequality formulation of the equilibrium conditions is derived and then utilized to establish existence and uniqueness properties of the solution pattern. An algorithm is proposed for the computation of the problem. Finally, the algorithm is applied to some special utility functions as numerical examples.

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