The Effect of Restricting Asset Trade in Dynamic Equilibrium Models
AbstractThis paper shows that differences between the predictions of an international real business cycle model with complete markets and the predictions of a model where agentscan only trade rsk-free bonds depend heavily on the calibrated values for the degree of persistence in productivity shocks, the discount factor and the degree of international spillovers in productivity shocks. Since empirical work yields point estimates of the degrees of persistence and spillovers in productiv- ity shocks that bear large standard errors, the outcomes of quantitative studies using only the point estimates of these parameters inherit the substantial uncertainty associated with the empirical estimates.
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Bibliographic InfoPaper provided by McMaster University in its series Department of Economics Working Papers with number 2002-02.
Length: 22 pages
Date of creation: Feb 2002
Date of revision:
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