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On the role of market insurance in a dynamic model

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  • Helge Braun

    ()

  • Winfried Koeniger

    ()

Abstract

Durables like cars or houses are a substantial component in the balance sheets of households. These durables are exposed to risk and can be insured in the market. We build a dynamic model in which agents have three possibilities to cope with the risk exposure of the durable stock: (i) purchase of market insurance, (ii) buffer-stock saving of the riskless asset or (iii) adjustment of the durable stock. We calibrate our model to the US economy and find a small role for market insurance. Copyright The Geneva Association 2007

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Bibliographic Info

Article provided by Springer in its journal THE GENEVA RISK AND INSURANCE REVIEW.

Volume (Year): 32 (2007)
Issue (Month): 1 (June)
Pages: 61-90

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Handle: RePEc:kap:geneva:v:32:y:2007:i:1:p:61-90

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Web page: http://www.springerlink.com/link.asp?id=102897

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Keywords: Consumption; Durables; Uncertainty; Insurance; Buffer-stock wealth; D81; E21; G22;

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Cited by:
  1. Marielle Brunette & Stephane Couture & Eric Langlais, 2007. "Hedging Strategies in Forest Management," Working Papers - Cahiers du LEF 2007-07, Laboratoire d'Economie Forestiere, AgroParisTech-INRA.
  2. Liu, Yanyan & Myers, Robert, 2012. "The dynamics of insurance demand under liquidity constraints and insurer default risk:," IFPRI discussion papers 1174, International Food Policy Research Institute (IFPRI).

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