Wealth distribution and asset prices

Dan Cao and Jinhui Bai
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Dan Cao: Georgetown University

No 1150, 2014 Meeting Papers from Society for Economic Dynamics

Abstract: We propose a model that explains the relationship between wealth distribution and asset prices over the business cycles. The model features an economy with a continuum of agents and with both idiosyncratic and aggregate shock a la Krusell and Smith (1998). However, we allow agents to trade in a long-lived asset in addition to in-contingent bonds. We develop a numerical method to calculate wealth-recursive equilibrium in the economy and apply the method to examine quantitatively the relationship between wealth distribution and asset prices in the U.S. economy.

Date: 2014
New Economics Papers: this item is included in nep-dge and nep-pbe
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed014:1150

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