In this talk, I will discuss the existence of a Radner equilibrium in a model with proportional transaction costs on an infinite time horizon. Two agents receive exogenous, unspanned income and choose between consumption and investing into an annuity. The discrete-time equilibrium converges to a continuous-time equilibrium model, which provides an explicit formula for the equilibrium interest rate in terms of the transaction cost parameter. I will show analytically that the interest rate can be either increasing or decreasing in the transaction costs depending on the agents' risk parameters.
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