Habit formation has been proposed as a possible solution for explaining the equity premium puzzle. This paper extends the class of models that support the habits explanation in order to account for heterogeneity in earnings, wealth, habits and consumption. I find that habit formation increases...

The goal of this paper is to analyze the connections Hungarian income and wealth distribution on the one hand, and the macroeconomics impactsof the global financial crisis of 2007-2008 on the other hand. To do this, I build a heterogenous agent, dynamic, general equilibrium model, which I...

We investigate the cyclicality of the private savings to GDP ratio for a panel of 19 OECD countries over the period 1971-2009. We find robust evidence that the private savings ratio is countercyclical. Three theories unambiguously predict a higher private savings ratio during recessions: a...

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

This paper examines the consequences of international financial integration in a two-sector heterogeneous-agent dynamic general equilibrium model of occupational choice with financial constraints and idiosyncratic risks. We discuss the macroeconomic and distributional effects of financial market...

We present a calibrated general equilibrium model in which collateral constraints substantially amplify and propagate aggregate shocks through their impact on asset prices and capital allocation. Compared to previous studies, this result is more robust and comes with more realistic interest rate...

It is commonly assumed that binding collateral constraints amplify the impact of aggregate shocks on the economy. However, we show that when firms can hedge against aggregate risk with state-contingent lending contracts, binding collateral constraints no longer amplify shocks relative to the...

We construct a dynamic model economy in which investors from segmented markets have varying financial asset demands. Intermediaries make arbitrage profits by exploiting the price spreads across markets. Meanwhile, they are required to separately post collateral to support arbitrage trades. We...

We examine the effects of collateralized borrowing in a realistically parameterized life-cycle portfolio choice problem. We provide basic intuition in a two-period model and then solve a multi-period model computationally. Our analysis provides insights into life-cycle portfolio choice relevant...