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This paper examines aggregate savings in a general equilibrium model where infinitely lived households face volatile … when income is constant. This additional capital accumulation has sometimes been interpreted as precautionary savings, but … I demonstrate that it is mostly generated by permanent-income motives. -- equilibrium interest rate ; aggregate savings …
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This paper shows that geographical investor heterogeneity strongly influences sovereign risk. While standard sovereign debt models mainly attribute the absence of sovereign defaults to foreign creditor retaliation, a new theoretical literature argues that domestic creditors also affect borrowing...
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