Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments September 25, 2017 erstellt
Beschreibung:
If agents in workhorse business cycle models with financial frictions are allowed to index contracts to observable aggregates, they share aggregate financial risk (almost) perfectly. Thus, the borrowing-constrained capital holders' wealth share does not collapse following adverse shocks and the financial accelerator mechanism is eliminated. I revisit this issue in the Bernanke, Gertler, and Gilchrist (1999), henceforth BGG, framework and show that this happens in the standard specification with TFP shocks partly because: i) borrowers and lenders are implicitly assumed to have identical, logarithmic utility, and ii) the representative lender's human wealth comoves closely with aggregate financial wealth. I then demonstrate that non-state-contingent borrowing rates, as initially imposed by BGG, can arise optimally in light of TFP shocks if:i) lenders' aversion to consumption fluctuations is increased to plausible degrees, or ii) at identical preferences for consumption, lenders face uninsurable idiosyncratic liquidity risk brought about by loss of employment