This paper deals with credit market imperfections and idiosyncratic risks in a two-sector heterogeneous agent dynamic general equilibrium model of occupational choice. We focus especially on the effects of tightening financial constraints on macroeconomic performance, entrepreneurial...

The paper demonstrates how the E-stability principle introduced by Evans and Honkapohja [2001. Learning and Expectations in Macroeconomics. Princeton University Press, Princeton, NJ] can be applied to models with heterogeneous and private information in order to assess the stability of rational...