focus on the relative contribution of two insurance mechanisms, namely, adjustments in labour supply and assets. My … the start of the year. To demonstrate the link between asset liquidity and insurance cyclicality, I develop an incomplete …

to a self-insurance motive, their consumption decisions are more sensitive to changes in expected income. On the other … liquid assets to smooth individual income shocks. We show that the response of this economy to aggregate shocks depends on … more insulated from income uncertainty. Therefore, aggregate shocks tend to have larger effects if liquid assets pay a …