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When capital market is imperfect, an entrepreneur has to invest substantial personal funds to start a firm and has to bear large firm-specific risk. Furthermore, if a typical entrepreneur is risk averse, private equity should earn a premium for idiosyncratic risk. In this paper I explore the...
There is by now a large literature characterising conditions under which learning schemes converge to rational expectations equilibria (REEs). It has been claimed that these results depend on the assumption of homogeneous agents and homogeneous learning. This paper analyses the stability of REEs...
Motivated by the success of internal habit formation preferences in explaining asset pricing puzzles, we introduce these preferences in a life-cycle model of consumption and portfolio choice with liquidity constraints, undiversifiable labor income risk and stock-market participation costs. In...
This paper shows that greater uncertainty about monetary policy can lead to a decline in nominal interest rates. In the context of a limited participation model, monetary policy uncertainty is modeled as a mean preserving spread in the distribution for the money growth process. This increase in...
This paper develops a dynamic general-equilibrium model of capital adjustments under monopolistic competition. Investments are partially irreversible. The model includes microfoundations for consumption decisions and capital-adjustment strategies. The effects of the model parameters on the...
This paper proves a complete market aggregation result for a multiple good economy in which the consumers have time-additive, von Neumann–Morgenstern utility functions. This result applies to all concave intraperiod functions, and provides a contrast to many of the results in the microeconomics...
In this study, we ask whether the presence of precautionary savings substantially reduces the optimal replacement rate in an European economy type characterized by high unemployment benefits and moral hazard. We build a simple job search model calibrated on French data and, in line with previous...
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