We study an economy where infinitely living agents face uninsurable shocks and are allowed default on their debt. After having defaulted, agents are excluded from the economy. We present a equilibrium definition allowing for both credit constraints and default inequilibrium. Indeed, existing...

In this paper, we present a tractable model of time-varying precautionary saving behaviour due to changes in uninsured unemployment risk. In our model, agents facing incomplete markets and borrowing constraints respond to changes in labour market conditions by altering their buffer stock of...

This paper introduces incomplete insurance against idioyncratic labour income risk into an otherwise standard New Keynesian business cycle model with involuntary unemployment. Following an adverse monetary policy shock that lowers aggregate demand, job creation is discouraged and unemployment...