This paper recasts the Aiyagari-Bewley-Huggett incomplete-markets model in continuous time, showing it reduces to a coupled system of a Hamilton-Jacobi-Bellman equation and a Kolmogorov Forward …
PublishedClassicReview of Economic StudiesOnline 23 Mar 2019Published Jan 2020
This paper shows that the standard New Keynesian monetary transmission mechanism -- in which a rate cut raises output and employment -- breaks down in the simplest possible heterogeneous-agent version …