Many assets derive their value not only from future cash flows but also from their ability to serve as collateral. In this paper, we investigate this collateral value and its impact on asset returns in an infinite-horizon general equilibrium model with heterogeneous agents facing collateral...

We study the co-evolution of asset prices and individual wealth in a financial market populated by an arbitrary number of heterogeneous, boundedly rational agents. Using wealth dynamics as a selection device we are able to characterize the long run market outcomes, i.e. asset returns and wealth...

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 document the cyclical properties of the balance sheets of different types of intermediaries. While the leverage of the bank sector is highly procyclical, the leverage of the nonbank financial sector is acyclical. We propose a theory of a two-agent financial intermediary sector within a...

I investigate whether the popular Krusell and Smith algorithm used to solve heterogeneousagent economies with aggregate uncertainty and incomplete markets is likely to be subject to multiple self-fulfilling equilibria. In a benchmark economy, the parameters representing the equilibrium aggregate...

The aim of this paper is to study the relationship between the intertemporal behavior of taxes and wealth distribution. The optimal-taxation literature has often concentrated on representative-agent models, in which it is optimal to smooth distortionary taxes. When tax liabilities are unevenly...

A common finding in empirical studies using micro data on consumer and producer prices is that hazard functions for price changes are decreasing. This means that a firm will have a lower probability of changing its price the longer it has kept it unchanged. This result is at odds with standard...

We study the dynamics of a Lucas-tree model with finitely lived agents who "learn from experience." Individuals update expectations by Bayesian learning based on observations from their own lifetimes. In this model, the stock price exhibits stochastic boom-and-bust fluctuations around the...

This paper introduces the problem of a planner who wants to control a population of heterogeneous agents subject to idiosyncratic shocks. The agents differ in their initial states and in the realization of the shocks. In continuous time, the distribution of states across agents is described by a...