Journal ArticleDOI
Cost of Business Cycles with Indivisibilities and Liquidity Constraints
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In this paper, simple general equilibrium models with incomplete insurance markets are examined in order to assess the impact of imperfect insurance on the magnitude of the welfare costs of business cycles, and certain statistical properties of the equilibrium stochastic processes in these environments are compared with those of a perfect insurance economy.Abstract:
It is almost universally agreed that individuals face incomplete insurance markets and cannot perfectly insure against the idiosyncratic risk. In this paper simple general equilibrium models with incomplete insurance markets are examined in order to assess the impact of imperfect insurance on the magnitude of the welfare costs of business cycles. Two versions of incomplete insurance markets are considered, and certain statistical properties of the equilibrium stochastic processes in these environments are compared with those of a perfect insurance economy.read more
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Uninsured Idiosyncratic Risk and Aggregate Saving
TL;DR: In this article, the authors present a qualitative and quantitative analysis of the standard growth model modified to include precautionary saving motives and liquidity constraints, and address the impact on the aggregate saving rate, the importance of asset trading to individuals, and the relative inequality of wealth and income distributions.
Journal ArticleDOI
Income and Wealth Heterogeneity in the Macroeconomy
Per Krusell,Anthony A. Smith +1 more
TL;DR: In this paper, a calibrated version of the stochastic growth model with partially uninsurable idiosyncratic risk and movements in aggregate productivity is used to analyze how movements in the distribution of income and wealth affect the macroeconomy.
Journal ArticleDOI
The risk-free rate in heterogeneous-agent incomplete-insurance economies
TL;DR: In this paper, the authors construct an economy where agents experience uninsurable idiosyncratic endowment shocks and smooth consumption by holding a risk-free asset, and calibrate the economy and characterize equilibria computationally.
Journal ArticleDOI
Asset Pricing with Heterogeneous Consumers
TL;DR: In this paper, a joint process of arbitrage-free asset prices, dividends, and aggregate income is shown to be supported in the equilibrium of an economy with judiciously modeled income heterogeneity.
Posted Content
Code and data files for "Unequal We Stand: An Empirical Analysis of Economic Inequality in the United States: 1967-2006"
TL;DR: In this article, all data and codes necessary to replicate results of the article were provided, including the data for figures, and all the data and code necessary to verify the results.
References
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Journal ArticleDOI
THE EQUITY PREMIUM A Puzzle
Rajnish Mehra,Edward C. Prescott +1 more
TL;DR: This paper showed that an equilibrium model which is not an Arrow-Debreu economy will be the one that simultaneously rationalizes both historically observed large average equity return and the small average risk-free return.
Journal ArticleDOI
Time to build and aggregate fluctuations
TL;DR: In this article, a general equilibrium model is developed and fitted to U.S. quarterly data for the post-war period, with the assumption that more than one time period is required for the construction of new productive capital and the non-time-separable utility function that admits greater intertemporal substitution of leisure.
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Consumption and Liquidity Constraints: An Empirical Investigation
TL;DR: In this article, the authors test the permanent income hypothesis against the alternative hypothesis that consumers optimize subject to a well-specified sequence of borrowing constraints, and the results generally support the hypothesis that an inability to borrow against future labor income affects the consumption of a significant portion of the population.
Book
Models of business cycles
TL;DR: In this article, the authors present a survey of the state-of-the-art methods to solve the problem of data aggregation in the context of data visualization. Section I. Section II. Section III. Section IV. Section V. Section VI. Section VII. Section VIII.
Journal ArticleDOI
International lending with moral hazard and risk of repudiation
TL;DR: In this article, the authors examined the constrained optimal pattern of capital flows between a lender and a borrower in an environment in which there are two impediments to forming contracts: the first impediment to contracting arises from the assumption that lenders cannot observe whether borrowers invest or consume borrowed funds.