Bankruptcy law, capital allocation, and aggregate effects: a dynamic heterogeneous agent model with incomplete markets
AbstractUnder the assumption that asset markets are incomplete, this paper introduces bankruptcy in an intertemporal heterogeneous 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.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Federal Reserve Bank of Atlanta in its series Working Paper with number 95-8.
Date of creation: 1995
Date of revision:
Other versions of this item:
- Tao Zha, 2001. "Bankruptcy Law, Capital Allocation, and Aggregate Effects: A Dynamic Heterogenous Agent Model with Incomplete Markets," Annals of Economics and Finance, Society for AEF, vol. 2(2), pages 379-400, November.
- 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.:
- Dubey, Pradeep & Shubik, Martin, 1979. "Bankruptcy and optimality in a closed trading mass economy modelled as a non-cooperative game," Journal of Mathematical Economics, Elsevier, vol. 6(2), pages 115-134, July.
- Athreya, Kartik B. & Simpson, Nicole B., 2006.
"Unsecured debt with public insurance: From bad to worse,"
Journal of Monetary Economics,
Elsevier, vol. 53(4), pages 797-825, May.
- Kartik Athreya & Nicole B. Simpson, 2004. "Unsecured debt with public insurance : from bad to worse," Working Paper 03-14, Federal Reserve Bank of Richmond.
- Athreya, Kartik B., 2008. "Default, insurance, and debt over the life-cycle," Journal of Monetary Economics, Elsevier, vol. 55(4), pages 752-774, May.
- Irwin, Gregor & Thwaites, Gregory, 2008. "Efficient frameworks for sovereign borrowing," Bank of England working papers 343, Bank of England.
- Sims, Christopher A. & Zha, Tao, 2006.
"Does Monetary Policy Generate Recessions?,"
Cambridge University Press, vol. 10(02), pages 231-272, April.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Meredith Rector).
If references are entirely missing, you can add them using this form.