Paper #319

Títol:

Equilibrium asset prices and savings of heterogeneous agents in the presence of incomplete markets and portfolio constraints

Autors:

Albert Marcet i Kenneth J. Singleton

Data:

Abril 1990

Resum:

We study the quantitative properties of a dynamic general equilibrium model in which agents face both idiosyncratic and aggregate income risk, state-dependent borrowing constraints that bind in some but not all periods and markets are incomplete. Optimal individual consumption -savings plans and equilibrium asset prices are computed under various assumptions about income uncertainty. Then we investigate whether our general equilibrium model with incomplete markets replicates two empirical observations: the high correlation between individual consumption and individual income, and the equity premium puzzle. We find that, when the driving processes are calibrated according to the data from wage income in different sectors of the US economy, the results move in the direction of explaining these observations, but the model falls short of explaining the observed correlations quantitatively. If the incomes of agents are assumed independent of each other, the observations can be explained quantitatively.

Paraules clau:

Incomplete markets, credit constraints, equity premium puzzle, consumption volatility, simulation

Codis JEL:

E21, G11, G12

Àrea de Recerca:

Macroeconomia i Economia Internacional

Publicat a:

Macroeconomic Dynamics, (1999), 3

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