Incomplete market dynamics in a neoclassical production economy
By: Goerge-Marios Angeletos, Laurent-Emmanuel Calvet.
Contributors: Calvet, Laurent E.; National Bureau of Economic Research.
Series: NBER working paper series ;; working paper 11016; Working paper series (National Bureau of Economic Research : Online) ;; working paper no. 11016.
Publisher: National Bureau of Economic Research
Published: 2004
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Subjects: Neoclassical school of economics.; Economics -- Mathematical models.
Description: "We investigate a neoclassical economy with heterogeneous agents, convex technologies and idiosyncratic production risk.  Combined with precautionary savings, investment risk generates rich effects that do not arise in the presence of pure endowment risk.  Under a finite horizon, multiple growth paths and endogenous fluctuations can exist even when agents are very patient.  In infinite-horizon economies, multiple steady states may arise from the endogeneity of risktaking and interest rates instead of the usual wealth effects.  Depending on the economy's parameters, the local dynamics around a steady state are locally unique, totally unstable or locally undetermined, and the equilibrium path can be attracted to a limit cycle.  The model generates closed-form expressions for the equilibrium dynamics and easily extends to a variety of environments, including heterogeneous capital types and multiple sectors"--National Bureau of Economic Research web site.
Notes: Includes bibliographical references.
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