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A Multi-country Real Business Cycle Model with Heterogeneous Agents

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  • van Wincoop, Eric

Abstract

A multicountry real business cycle model is developed capturing two important aspects of heterogeneity found in household survey data: only a small fraction of the population holds stock and a significant fraction of nonstockholders are borrowing constrained. The model is applied to data for twenty OECD countries. It generates cross-country consumption correlations consistent with those observed in the data. Potential welfare gains from international portfolio diversification by stockholders are large, leaving the observed 'home bias' as a significant puzzle. The model can also account for the finding in U.S. data that consumption of stockholders is more volatile than that of nonstockholders. Copyright 1996 by The editors of the Scandinavian Journal of Economics.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Scandinavian Journal of Economics.

Volume (Year): 98 (1996)
Issue (Month): 2 (June)
Pages: 233-51

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Handle: RePEc:bla:scandj:v:98:y:1996:i:2:p:233-51

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Web page: http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1467-9442

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Cited by:
  1. Eva de Francisco, 2005. "Limited Participation, Income Distribution and Capital Account Liberalization," Computing in Economics and Finance 2005 454, Society for Computational Economics.
  2. Bottazzi, Laura & Pesenti, Paolo & van Wincoop, Eric, 1996. "Wages, profits and the international portfolio puzzle," European Economic Review, Elsevier, vol. 40(2), pages 219-254, February.
  3. Paolo Pesenti & Eric van Wincoop, 1996. "Do Nontraded Goods Explain the Home Bias Puzzle?," NBER Working Papers 5784, National Bureau of Economic Research, Inc.
  4. Eric van Wincoop, 1998. "How big are potential welfare gains from international risksharing?," Staff Reports 37, Federal Reserve Bank of New York.
  5. Bacchetta, Philippe & van Wincoop, Eric, 1997. "Trade in Nominal Assets and Net International Capital Flows," CEPR Discussion Papers 1569, C.E.P.R. Discussion Papers.
  6. Stefano ATHANASOULIS & Eric VAN WINCOOP, 1997. "Growth Uncertainty And Risksharing," Economic Report 41, Iowa State University Department of Economics.
  7. Stefano Athanasoulis & Robert Shiller & Eric van Wincoop, 1999. "Macro markets and financial security," Economic Policy Review, Federal Reserve Bank of New York, issue Apr, pages 21-39.
  8. Eva de Francisco, 2005. "Limited Participation, Income Distribution and Capital-Account Liberalization: Working Paper 2005-02," Working Papers 16302, Congressional Budget Office.
  9. Gao, Xiaodan & Hnatkovska, Viktoria & Marmer, Vadim, 2012. "Limited Participation in International Business Cycle Models: A Formal Evaluation," Microeconomics.ca working papers vadim_marmer-2012-1, Vancouver School of Economics, revised 21 Dec 2013.
  10. Lee, Khang Min & Moyen, Nathalie, 2006. "Optimal liberalization of financial markets," Journal of International Money and Finance, Elsevier, vol. 25(8), pages 1319-1335, December.

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