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Speech
Conjectures on Learning in Krusell-Smith-Type Economies
Virtual presentation on conjectures on learning in Krusell-Smith-type economies during a panel discussion at the 2021 Bank of Canada Annual Economic Conference, Behavioral Macroeconomics and Finance: Implications for Central Bankers.
Working Paper
Equilibrium Multiplicity in Aiyagari and Krusell-Smith
Repeatedly solving the Aiyagari (1994) model with random parameters, we construct hundreds of examples with multiple stationary equilibria. We never find multiplicity with risk aversion less than ≈ 1.49, depreciation less than ≈ 0.19, or income persistence less than ≈ 0.47, and multiplicity requires a disaster state for income. In cases with multiplicity, the lowest rental rate occurs near depreciation times the capital share. It is possible for the economy, without a change in fundamentals, to transition rationally from a higher-rate equilibrium to one with a lower rental rate, lower ...