This project continues the investigator's recent work on economies characterized by uncertainty and in which the market for assets is incomplete. The topics to be addressed under this grant are: demand theory, constrained optimality, pricing of non-redundant assets, existence of equilibria for a fixed asset structure, and infinite-horizon economies. These topics are important and progress in these areas will contribute to an improvement in other fields of economics such as macroeconomics, finance, and monetary theory. Furthermore, this research should shed light on a number of important questions in economics. For example, can an active monetary policy be effective, and if so, is it desirable? To what extent and under what conditions can business cycles be induced by incomplete asset markets?
