AIYAGARI, BEWLEY, HUGGETT, IMROHOROĞLU (ABHI) ECONOMIES: LITERATURE REVIEW AND COMPUTATIONAL EXAMPLES
Keywords:
Aiyagari, Bewley, Huggett, Imrohoroğlu (ABHI) economies, incomplete markets, heteoregenous agents, pure credit model
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.
References
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28. Imrohoroğlu A, Imrohoroglu S, Joines DH. (1993). A Numerical Algorithm for Solving Models With Incomplete Markets. The International Journal of Supercomputing Applications. 1993;7(3),pp.212-230. doi:10.1177/109434209300700304
29. Imrohoroğlu, A. (1989). Cost of Business Cycles with Indivisibilities and Liquidity Constraints. Journal of Political Economy, 97(6), pp.1364–1383. http://www.jstor.org/stable/1833243
30. Imrohoroğlu, A. (1992). The Welfare Cost of Inflation Under Imperfect Insurance. ˙ Journal of Economic Dynamics and Control, Vol. 16(1), pp. 79–92
31. İmrohoroǧlu, A., İmrohoroǧlu, S., & Joines, D. H. (1995). A Life Cycle Analysis of Social Security. Economic Theory, 6(1), pp.83–114. http://www.jstor.org/stable/25054865
32. Inada, Ken-Ichi (1963). On a Two-Sector Model of Economic Growth: Comments and a Generalization. The Review of Economic Studies. 30 (2), pp.119–127.
33. Jacobsen.M(1996). Laplace and the Origin of the Ornstein-Uhlenbeck Process. Bernoulli, Vol. 2, No. 3. (Sept. 1996), pp. 271 – 286.
34. Kaplan, Greg, and Violante. G. L. (2010). How Much Consumption Insurance beyond Self-Insurance? American Economic Journal: Macroeconomics, 2 (4),pp. 53-87.
35. Kopecky, K. A. and R. M. H. Suen (2010). Finite state Markov-chain approximations to highly persistent processes. Review of Economic Dynamics 13 (3), pp.701–714.
36. Krusell, P., A. A. Smith (1998). Income and Wealth Heterogeneity in the Macroeconomy,Journal of Political Economy, 106(5), pp.867-896.
37. Ljungqvist,L. Sargent,T.J.(2018).Recursive Macroeconomic Theory. The MIT Press
38. Lucas, R.E., (1980). Equilibria in a pure currency economy, in: J. Kareken and N. Wallace, eds.,Models of monetary economies (Federal Reserve Bank of Minneapolis, Minneapolis, MN)
39. Lucas, R.E.Jr (1987). Models of business cycles. Oxford: Basil Blackwell, 1987. pp. 120
40. Mehra, R. and E.C. Prescott (1985). The equity premium: A puzzle, Journal of Monetary Economics 15, pp.145-162.
41. Modigliani, F.( 1988). The Role of Intergenerational Transfers and Life Cycle Saving in the Accumulation of Wealth. Journal of Economic Perspectives, 2 (2),pp.15-40.
42. Papoulis, A.(1984) .Brownian Movement and Markoff Processes. Ch. 15 in Probability, Random Variables, and Stochastic Processes, 2nd ed. New York: McGraw-Hill, pp. 515-553.
43. Revuz,D. Yor, M. (2005). Continuous Martingales and Brownian Motion, Third Edition Corrected. Volume 293, Grundlehren der mathematischen Wissenschaften. Springer, Berlin, 2005.
44. Rouwenhorst, G. (1995). Asset pricing implications of equilibrium business cycle models. In T. F. Cooley (Ed.), Frontiers of Business Cycle Research, Chapter 10. Princeton University Press.
45. Scheinkman, Jose A., and Weiss, Laurence. (1986). Borrowing Constraints and Aggregate Economic Activity. Econometrica 54 ,pp.23-45.
46. Stiglitz, J.E.(2018). Where modern macroeconomics went wrong. Oxford Review of Economic Policy, Volume 34, Numbers 1–2, 2018, pp. 70–106.
47. Taub, B., (1988). Efficiency in a pure currency economy with inflation, Economic Inquiry 26, pp.567-583
48. Tobin, James, and Dolde, Walter. (1971). Wealth, Liquidity and Consumption. In Consumer Spending and Monetary Policy: The Linkages. Monetary Conference Series, no. 5. Boston: Fed. Reserve Bank Boston.
49. Townsend, R. M.(1988). Information-constrained Insurance: The Revelation Principle Extended. J. Monetary Econ. 21 (March/May 1988),pp.411-50. Zeldes, S. P. (1989). Consumption and Liquidity Constraints: An Empirical Investigation. Journal of Political Economy, 97(2), pp.305–346. http://www.jstor.org/stable/1831315
2. Aiyagari, S. Rao (1994). Uninsured Idiosyncratic Risk and Aggregate Saving, The Quarterly Journal of Economics, Volume 109, Issue 3, pp. 659–684, https://doi.org/10.2307/2118417
3. Aiyagari, S. Rao (1995). Optimal Capital Income Taxation with Incomplete Markets, Borrowing Constraints, and Constant Discounting. Journal of Political Economy, 103(6), pp.1158–1175. http://www.jstor.org/stable/2138707
4. Applebaum, D.(2004). Lèvy Procesess and Stochastic Calculus. Cambridge University Press, Cambrigde, UK.
5. Arrow, J. (1951). An Extension of the Basic Theorems of Classical Welfare Economics. In J. Neyman (ed.), Proceedings of the Second Berkeley Symposium on Mathematical Statistics and Probability (p./pp. 507--532), : University of California Press.
6. Arrow, K. J.; Debreu, G. (1954). Existence of an equilibrium for a competitive economy. Econometrica. 22 (3),pp.265–290.
7. Arrow, Kenneth J.; Debreu, Gérard (1954). Existence of an equilibrium for a competitive economy. Econometrica. The Econometric Society. 22 (3): 265–90. doi:10.2307/1907353. JSTOR 1907353
8. Atkeson, A.(1988).International Lending with Moral Hazard and Risk of Repudiation. Manuscript. Chicago: Univ. Chicago.
9. Bernanke, Ben S., Mark Gertler, and Simon Gilchrist. (1999). The Financial Accelerator in a Quantitative Business Cycle Framework. Chap.21 in Handbook of Macroeconomics vol. 1C. Elsevier
10. Bewley, Truman F. (1977). The Permanent Income Hypothesis: A Theoretical Formulation" (PDF). J. Econ. Theory. 16 (2),pp. 252–92.
11. Bewley,T.F.(1986).Stationary monetary equilibrium with a continuum of independently fluctuating consumers.In "Contributions to Mathematical Economics in Honor of Gerard Debreu" (W. Hildenbrand and A. Mas-Colell (eds.), North Holland
12. Boppart,T.,Krusell,P.Mitman,K.(2018).Exploiting MIT shocks in heterogeneous-agent economies: the impulse response as a numerical derivative. Journal of Economic Dynamics and Control,Volume 89,pp. 68-92
13. Brock, William A., Mirman,L. (1972).Optimal Economic Growth and Uncertainty: The Discounted Case, Journal of Economic Theory, IV (1972),pp.479-513.
14. Carlstrom, Charles T., and Timothy S. Fuerst. (1997). Agency Costs, Net Worth, and Business Fluctuations: A Computable General Equilibrium Analysis. American Economic Review,87(5),pp.893–910.
15. Constantinides, G. M., & Duffie, D. (1996). Asset Pricing with Heterogeneous Consumers. Journal of Political Economy, 104(2), pp.219–240. http://www.jstor.org/stable/2138925
16. Debortoli D. Galí,J( 2017). Monetary policy with heterogeneous agents: Insights from TANK models, Economics Working Papers 1686, Department of Economics and Business, Universitat Pompeu Fabra, revised May 2021.
17. Galí, Jordi, J. David LÓpez-Salido, and Javier Vall´es. (2007). Understanding the Effects of Government Spending on Consumption. Journal of the European Economic Association 5(1),pp.227–70
18. Galo,N. Moll,B.( 2018). Social Optima in Economies with Heterogeneous Agents, Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 28, pp. 150-180.
19. Geanakoplos, J.D.; (1990). An introduction to general equilibrium with incomplete asset markets. Journal of Mathematical Economics, 19(1-2), pp. 1–38.
20. Geanakoplos, J.D.; Polemarchakis, H.M. (1986). Existence, regularity and constrained suboptimality of competitive allocations when the asset structure is incomplete. In Hell, W.P.; Starr, R.M.; Starrett, D.A. (eds.). Uncertainty, information and communication: Essays in honor of K.J. Arrow. Vol. 3. Cambridge University Press. pp. 65–95. ISBN 9780521327046.
21. Gradshteyn, I. S. and Ryzhik, I. M. (2000). Hessian Determinants, in Tables of Integrals, Series, and Products, 6th ed. San Diego, CA: Academic Press, p. 1069.
22. Green, E.(1987). Lending and the Smoothing of Uninsurable Income. In Contractual Arrangements for Intertemporal Trade, edited by Edward C. Prescott and Neil Wallace. Minnesota Studies in Macroeconomics, vol. 1. Minneapolis: Univ. Minnesota Press.
23. Hansen, G. D., Imrohoroğlu, A. (1992). The Role of Unemployment Insurance in an Economy with Liquidity Constraints and Moral Hazard. Journal of Political Economy, 100(1), pp.118–142. http://www.jstor.org/stable/2138808
24. Heathcote, Jonathan, Kjetil Storesletten, and Giovanni L. Violante. (2012). Consumption and Labor Supply with Partial Insurance: An Analytical Framework. Mimeo. Working paper, Federal Reserve Bank of Minneapolis and NYU
25. Heathcote,J., Storesletten, K., Violante, G. L.(2009). Quantitative Macroeconomics with Heterogeneous Households. Annual Review of Economics, 1(1), pp.319–354. doi: 10.1146/annurev.economics.05
26. Hopenhayn, H. A. (1992). Entry, Exit, and firm Dynamics in Long Run Equilibrium. Econometrica, 60(5), pp.1127–1150. https://doi.org/10.2307/2951541
27. Huggett, M. (1993). The risk-free rate in heterogeneous-agents, incomplete insurance economies. Journal of Economic Dynamics and Control 17 (5/6), pp.953–970.
28. Imrohoroğlu A, Imrohoroglu S, Joines DH. (1993). A Numerical Algorithm for Solving Models With Incomplete Markets. The International Journal of Supercomputing Applications. 1993;7(3),pp.212-230. doi:10.1177/109434209300700304
29. Imrohoroğlu, A. (1989). Cost of Business Cycles with Indivisibilities and Liquidity Constraints. Journal of Political Economy, 97(6), pp.1364–1383. http://www.jstor.org/stable/1833243
30. Imrohoroğlu, A. (1992). The Welfare Cost of Inflation Under Imperfect Insurance. ˙ Journal of Economic Dynamics and Control, Vol. 16(1), pp. 79–92
31. İmrohoroǧlu, A., İmrohoroǧlu, S., & Joines, D. H. (1995). A Life Cycle Analysis of Social Security. Economic Theory, 6(1), pp.83–114. http://www.jstor.org/stable/25054865
32. Inada, Ken-Ichi (1963). On a Two-Sector Model of Economic Growth: Comments and a Generalization. The Review of Economic Studies. 30 (2), pp.119–127.
33. Jacobsen.M(1996). Laplace and the Origin of the Ornstein-Uhlenbeck Process. Bernoulli, Vol. 2, No. 3. (Sept. 1996), pp. 271 – 286.
34. Kaplan, Greg, and Violante. G. L. (2010). How Much Consumption Insurance beyond Self-Insurance? American Economic Journal: Macroeconomics, 2 (4),pp. 53-87.
35. Kopecky, K. A. and R. M. H. Suen (2010). Finite state Markov-chain approximations to highly persistent processes. Review of Economic Dynamics 13 (3), pp.701–714.
36. Krusell, P., A. A. Smith (1998). Income and Wealth Heterogeneity in the Macroeconomy,Journal of Political Economy, 106(5), pp.867-896.
37. Ljungqvist,L. Sargent,T.J.(2018).Recursive Macroeconomic Theory. The MIT Press
38. Lucas, R.E., (1980). Equilibria in a pure currency economy, in: J. Kareken and N. Wallace, eds.,Models of monetary economies (Federal Reserve Bank of Minneapolis, Minneapolis, MN)
39. Lucas, R.E.Jr (1987). Models of business cycles. Oxford: Basil Blackwell, 1987. pp. 120
40. Mehra, R. and E.C. Prescott (1985). The equity premium: A puzzle, Journal of Monetary Economics 15, pp.145-162.
41. Modigliani, F.( 1988). The Role of Intergenerational Transfers and Life Cycle Saving in the Accumulation of Wealth. Journal of Economic Perspectives, 2 (2),pp.15-40.
42. Papoulis, A.(1984) .Brownian Movement and Markoff Processes. Ch. 15 in Probability, Random Variables, and Stochastic Processes, 2nd ed. New York: McGraw-Hill, pp. 515-553.
43. Revuz,D. Yor, M. (2005). Continuous Martingales and Brownian Motion, Third Edition Corrected. Volume 293, Grundlehren der mathematischen Wissenschaften. Springer, Berlin, 2005.
44. Rouwenhorst, G. (1995). Asset pricing implications of equilibrium business cycle models. In T. F. Cooley (Ed.), Frontiers of Business Cycle Research, Chapter 10. Princeton University Press.
45. Scheinkman, Jose A., and Weiss, Laurence. (1986). Borrowing Constraints and Aggregate Economic Activity. Econometrica 54 ,pp.23-45.
46. Stiglitz, J.E.(2018). Where modern macroeconomics went wrong. Oxford Review of Economic Policy, Volume 34, Numbers 1–2, 2018, pp. 70–106.
47. Taub, B., (1988). Efficiency in a pure currency economy with inflation, Economic Inquiry 26, pp.567-583
48. Tobin, James, and Dolde, Walter. (1971). Wealth, Liquidity and Consumption. In Consumer Spending and Monetary Policy: The Linkages. Monetary Conference Series, no. 5. Boston: Fed. Reserve Bank Boston.
49. Townsend, R. M.(1988). Information-constrained Insurance: The Revelation Principle Extended. J. Monetary Econ. 21 (March/May 1988),pp.411-50. Zeldes, S. P. (1989). Consumption and Liquidity Constraints: An Empirical Investigation. Journal of Political Economy, 97(2), pp.305–346. http://www.jstor.org/stable/1831315
Published
2023-12-22
Section
Articles
