Bankruptcy Law, Capital Allocation, and Aggregate Effects: A Dynamic Heterogenous Agent Model with Incomplete Markets
AbstractUnder the assumption that asset markets are incomplete, this paper introduces bankruptcy in an intertemporal heterogenous agent model with capital accumulation and heterogeneous agents. It explores the role of regulatory intervention and argues that intervention in the form of a level of bankruptcy exemption can enhance not only social welfare but also distributive equity. The bankruptcy law is carefully specified in the model. The model generates distributional changes in consumption, capital, and bankruptcy risk in response to an adjustment in the exemption level and accentuates the effects of these redistributions on aggregate variables.
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Bibliographic InfoArticle provided by Society for AEF in its journal Annals of Economics and Finance.
Volume (Year): 2 (2001)
Issue (Month): 2 (November)
Bankruptcy law; Capital allocations; Heterogenous agent; Incomplete markets;
Other versions of this item:
- Tao Zha, 1995. "Bankruptcy law, capital allocation, and aggregate effects: a dynamic heterogeneous agent model with incomplete markets," Working Paper, Federal Reserve Bank of Atlanta 95-8, Federal Reserve Bank of Atlanta.
- E69 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Other
- D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
- D92 - Microeconomics - - Intertemporal Choice - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
- G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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- Irwin, Gregor & Thwaites, Gregory, 2008. "Efficient frameworks for sovereign borrowing," Bank of England working papers, Bank of England 343, Bank of England.
- Sims, Christopher A. & Zha, Tao, 2006.
"Does Monetary Policy Generate Recessions?,"
Macroeconomic Dynamics, Cambridge University Press,
Cambridge University Press, vol. 10(02), pages 231-272, April.
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