International capital flows have increased dramatically since the 1980s, with much of the increase being due to trade in equity and debt markets. Such developments are often attributed to the increased integration of world financial markets. We present a model that allows us to examine how...

This paper presents a new numerical method for solving stochastic general equilibrium models with dynamic portfolio choice over many financial assets. The method can be applied to models where there are heterogeneous agents, time-varying investment opportunity sets, and incomplete asset markets....