Lorenzoni, Guido; Feriozzi, Fabio; Castiglionesi, Fabio - Society for Economic Dynamics - SED - 2009
and to increase the level of long term investment. In this case, partial integration opens up the opportunity for the occurrence of extreme events. That is, the cost of liquidity can become unusually high and the optimal consumption can display both higher volatility than in autarky and negative...