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Incomplete market dynamics in a neoclassical production economy 1 edition

Cover of: Incomplete market dynamics in a neoclassical production economy | Marios Angeletos
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Incomplete market dynamics in a neoclassical production economy
George-Marios Angeletos, Laurent-Emmanuel Calvet

Published 2004 by Massachusetts Institute of Technology, Dept. of Economics in Cambridge, Mass .
Written in English.

About the Book

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. Keywords: Entrepreneurial Risk, Precautionary Motive, Endogenous Fluctuations, Poverty Traps. JEL Classifications: D51, D52, D92, E20, E32.

Edition Notes

"November 2004."

Includes bibliographical references (p. 30-31).

Abstract in HTML and working paper for download in PDF available via World Wide Web at the Social Science Research Network.

Working paper series / Massachusetts Institute of Technology, Dept. of Economics -- working paper 04-41, Working paper (Massachusetts Institute of Technology. Dept. of Economics) -- no. 04-41.

The Physical Object

31, [4] p. :
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