We explore empirically whether earnings uncertainty and borrowing constraints deter households from the stockmarket, consistent with the predictions of theoretical studies of portfolio choice in the presence of uninsurable earnings. Recent extensions highlight the importance of the correlation...

We investigate the impact of a non-financial background risk ˜" on the preference rankings between two independent financial risks ˜z1 and ˜z2 for an expected-utility maximizer. More precisely, we provide necessary and sufficient conditions for the alternative (x0 + ˜z1, y0 + ˜") to be...

We introduce the notion of cross-risk vulnerability to generalize the concept of risk vulnerability introduced by Gollier and Pratt [Gollier, C., Pratt, J.W. 1996. Risk vulnerability and the tempering effect of background risk. Econometrica 64, 1109–1124]. While risk vulnerability captures the...

We consider a small-open, collateral-constrained AK economy. We show that the combination of CARA preferences and uncertainty on capital inflows in such an economy generates long-term (expected) growth while the deterministic counterpart does not. In this framework, long-term growth is entirely...

The relationship between the current account and the macroeconomic development remains an important issue in an open economy. Recently, global current account imbalances, and more specifically the large deficit in the United States and the surplus in China and other Asian economies, continue to...