This paper uses a dynamic general equilibrium model to examine whether financial innovations destabilize an economy. Applying a neoclassical production function, we demonstrate that as financial frictions are mitigated, the economy loses stability and a ip bifurcation occurs at a certain level...

This paper uses a dynamic general equilibrium model to examine whether financial innovations destabilize an economy. Applying a neoclassical production function, we demonstrate that as financial frictions are mitigated, the economy loses stability and a ip bifurcation occurs at a certain level...

Although many studies in macroeconomics have examined the role of insurance in the presence of income risk, whether aggregate shocks are insurable has not been sufficiently investigated. We present a simple two-period general equilibrium model to show the conditions under which insurance against...

Although many studies in macroeconomics have examined the role of insurance in the presence of income risk, whether aggregate shocks are insurable has not been sufficiently investigated. We present a simple two-period general equilibrium model to show the conditions under which insurance against...