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.
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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
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