Creator: Kehoe, Patrick J. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) Number: 367 Keyword: Shocks, Dynamic economy, Risk, Equilibrium, Stochastic comparative statistics, and Stockman Subject (JEL): C19 - Econometric and statistical methods : General - Other and E13 - General aggregative models - Neoclassical
Creator: Aiyagari, S. Rao. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) Number: 518 Abstract:
This paper is about a useful way of taking account of frictions in asset pricing and macroeconomics. I start by noting that complete frictionless markets models have a number of empirical deficiencies. Then I suggest an alternative class of models with incomplete markets and heterogenous agents which can also accommodate a variety of other frictions. These models are quantitatively attractive and computationally feasible and have the potential to overcome many or all of the empirical deficiencies of complete frictionless markets models. The incomplete markets model can also differ significantly from the complete frictionless markets model on some important policy questions.
Keyword: Friction, Frictionless market model, Asset pricing, Macroeconomics, and Incomplete markets Subject (JEL): E13 - General aggregative models - Neoclassical and G12 - General financial markets - Asset pricing ; Trading volume ; Bond interest rates
Creator: Cooley, Thomas F., Hansen, Gary D. (Gary Duane), and Prescott, Edward C. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) Number: 535 Keyword: Equilibrium and Business cycle Subject (JEL): E13 - General aggregative models - Neoclassical and E32 - Prices, business fluctuations, and cycles - Business fluctuations ; Cycles