The main contribution of this work is to provide a dynamic general equilibrium model of asset allocation, allowing to reconcile economic theory with several puzzling contradictions recently pointed out in the literature: (i) the asset allocation puzzle, (ii) the observed time-variation in...

The main goal of this paper is to measure the welfare costs of business cycles in a production economy in which the representative agent has low risk aversion and - at the same time - the equity premium and the co-movements of aggregate quantities and market returns are comparable to what...

This paper evaluates to what extent the introduction of firing costs can affect the aggregate dynamics of a neoclassical growth model with heterogeneous establishments. Similarly to the previous literature, firing costs are found to have large steady-state effects. However, they have no...

Personal bankruptcy filings have increased dramatically: rising from 1.4 in per thousand of working age population 1970 to 8.5 in 2002 in the United States and from 0.2 in 1970 to 4.3 in 2002 in Canada. This paper asks whether 6 commonly mentioned potential explanations -- financial innovation,...

Shifts in the underlying growth rate of productivity, such as occurred in the 1970s and the 1990s, are relatively rare and difficult to identify in real time. In this paper, we document that economists' projections of trend productivity growth adjust gradually to shifts in trend growth. We find...

Both empirical and theoretical evidence suggests that preference heterogeneity is a necessary feature of any model that is able to account for observed heterogeneity in wealth and lifetime income and consumption profiles. Why do tastes differ across people? We propose a framework in which people...

This paper studies equilibrium portfolios in the standard neoclassical growth model under uncertainty with heterogeneous agents and dynamically complete markets. Preferences are purposely restricted to be quasi-homothetic. The main source of heterogeneity across agents is due to different...