Sunspots and the Sequential Regularity of Competitive Equilibria
Abstract This paper studies the regularity of competitive equilibria in a two period exchange economy with one asset where a sunspot signal is observed in the beginning of the second period. It is shown that an equilibrium which does not depend on sunspots is regular if and only if it is sequentially regular as an equilibrium of the economy without sunspots. Hence if the asset is real, a sequential regular equilibrium is robust against any sunspot structure, which may be endogenously generated. Journal of Economic Literature Classification Numbers: C62, D52, D84