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,s) firm-level investment policies.In the presence of persistent heterogeneity in capital, debt and total factor productivity …, the effects of a financial shock are amplified and propagated through large and long-lived disruptions to the distribution … shock itself. This recession, and the subsequent recovery, is distinguished both quantitatively and qualitatively from that …
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A planner sets a lump sum transfer and a linear tax on labor income in an economy with incomplete markets, heterogeneous agents, and aggregate shocks. The planner's concerns about redistribution impart a welfare cost to fluctuating transfers. The distribution of net asset holdings across agents...
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We assess the degree of consumption smoothing implicit in a calibrated life-cycle version of the standard incomplete-markets model, and we compare it to the empirical estimates of Blundell et al. (2008) (BPP hereafter). We find that households in the model have access to less...
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