TY - JOUR
T1 - On the quantitative importance of market completeness
AU - Ríos-Rull, José Víctor
PY - 1994/12
Y1 - 1994/12
N2 - This paper quantitatively compares allocations in calibrated large overlapping generations growth models that only differ in their market structures for insuring against aggregate risk. The findings are that the equilibrium behavior of aggregate variables is very similar across all market structures. There are only minor differences: the ratio of the volatility of aggregate consumption relative to that of investment is higher in complete market economies, due partly to the higher volatility of consumption of older people. It was also found that the risk premia in complete markets economies is basically zero. Therefore, we can conclude that we can for the most part abstract from the issue of whether there exist markets for aggregate risk.
AB - This paper quantitatively compares allocations in calibrated large overlapping generations growth models that only differ in their market structures for insuring against aggregate risk. The findings are that the equilibrium behavior of aggregate variables is very similar across all market structures. There are only minor differences: the ratio of the volatility of aggregate consumption relative to that of investment is higher in complete market economies, due partly to the higher volatility of consumption of older people. It was also found that the risk premia in complete markets economies is basically zero. Therefore, we can conclude that we can for the most part abstract from the issue of whether there exist markets for aggregate risk.
KW - Dynamic general equilibrium
KW - Market completeness
KW - Risk premium
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U2 - 10.1016/0304-3932(94)90029-9
DO - 10.1016/0304-3932(94)90029-9
M3 - Article
AN - SCOPUS:0000398032
VL - 34
SP - 463
EP - 496
JO - Journal of Monetary Economics
JF - Journal of Monetary Economics
SN - 0304-3932
IS - 3
ER -