AIYAGARI, BEWLEY, HUGGETT, IMROHOROĞLU (ABHI) ECONOMIES: LITERATURE REVIEW AND COMPUTATIONAL EXAMPLES

Abstract

This paper will review ABHI models in economics. Namely those are collection of models Aiyagari-Bewley-Hugget-Imrohoroglu economies where there is precautionary savings amongst the economic agents, liquidity constraints, and where Markets are exogenously incomplete. There is incompleteness by assumption as opposed to limited commitment and limited enforcement models. In Huggett (1993) model there is diminishing marginal savings rates for some agents and negative marginal savings rate for other agents with an increase in their wealth (assets). In the incomplete markets in general equilibrium cash-on hand  is more in consumption with lower assets, this applies even more so in partial equilibrium model. And in the period with lowest: consumption, income and assets incomplete markets in partial equilibrium model predicts highest savings rate.