Uninsured idiosyncratic investment risk and aggregate saving
By: George-Marios Angeletos.
Contributors: National Bureau of Economic Research.
Series: NBER working paper series ;; working paper 11180; Working paper series (National Bureau of Economic Research : Online) ;; working paper no. 11180.
Publisher: National Bureau of Economic Research
Published: 2005
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Subjects: Investments -- Mathematical models.; Saving and investment -- Mathematical models.; Interest rate risk -- Mathematical models.
Description: "This paper augments the neoclassical growth model to study the macroeconomic effects of idiosyncratic investment risk.  The general equilibrium is solved in closed form under standard assumptions for preferences and technologies.  A simple condition is identified for incomplete markets to result in both a lower interest rate and a lower capital stock in the steady state: the elasticity of intertemporal substitution must be higher than the income share of capital.  For plausible calibrations of the model, the reduction in the steady-state levels of aggregate savings and income relative to complete markets is quantitatively significant.  Finally, cyclical variation in private investment risks is shown to amplify the transitional dynamics"--National Bureau of Economic Research web site.
Notes: Also available in print.
Includes bibliographical references.
Title from PDF file as viewed on 3/18/2005.
System requirements: Adobe Acrobat Reader.
Mode of access: World Wide Web.