This paper compares different solution methods for computing the equilibrium of dynamic stochastic general equilibrium (DSGE) models with rare disasters along the lines of those proposed by Rietz (1988), Barro (2006), Gabaix (2012), and Gourio (2012). DSGE models with rare disasters require...

We study the distributional effects of asset returns using a heterogeneous-agent model estimated to match the joint distribution of wealth and returns. In the model, endogenous portfolio decisions play a key role through their impact on households' wealth accumulation. We find substantial...

We study the distributional effects of asset returns using a heterogeneous-agent model estimated to match the joint distribution of wealth and returns. In the model, endogenous portfolio decisions play a key role through their impact on households' wealth accumulation. We find substantial...

Barro et al. (2022) investigate the quantity of safe assets held in the cross-section of developed countries and find that the average safe-asset ratio (ratio of safe assets to total assets) was 37% in 2015 and has remained relatively stable over time. They also document a crowding-out...

A safe asset's real value is insulated from shocks, including declines in GDP from rare macroeconomic disasters. However, in a Lucas-tree world, the aggregate risk is given by the process for GDP and cannot be altered by the creation of safe assets. Therefore, in the equilibrium of a...