We study the effects of permanent and temporary income shocks on precautionary saving and investment in a ""store-or-sow"" model of growth. High volatility of permanent shocks results in high precautionary saving in the safe asset and low investment, or a ""volatility trap."" Namely, big savers...

We study the effects of permanent and temporary income shocks on precautionary saving and investment in a ""store-or-sow"" model of growth. High volatility of permanent shocks results in high precautionary saving in the safe asset and low investment, or a ""volatility trap."" Namely, big savers...

We study the effects of permanent and temporary income shocks on precautionary saving and investment in a "store-or-sow" model of growth. High volatility of permanent shocks results in high precautionary saving in the safe asset and low investment, or a "volatility trap." Namely, big savers...