TY - JOUR
T1 - Real returns on government debt
T2 - A general equilibrium quantitative exploration
AU - Díaz-Giménez, Javier
AU - Prescott, Edward C.
N1 - Funding Information:
We thank the Institute for Empirical Macroeconomics for providing super computer time and the NSF and the DGICYT for providing financial support. Conversations with John Moore and the comments of two anonymous referees are gratefully acknowledged. An early version of this paper was reproduced as Working Paper no. 450 of the Research Department of the Federal Reserve bank of Minneapolis. That version of the paper was entitled `Liquidity constraints in economies with aggregate fluctuations: a quantitative exploration'.
PY - 1997/1
Y1 - 1997/1
N2 - We extend and apply computable general equilibrium methods to the study of economies with both aggregate uncertainty and uninsured household-specific uncertainty. In our economies the government issues two types of assets: a small denomination, non-interest bearing asset, which we call currency, and a large denomination, interest bearing asset, which we call T-bills. We find that a real interest rate behavior similar to that observed in the U.S. can be sustained as equilibrium behavior in our class of economies. We also find that policy induced real interest rate changes that are perceived as being permanent have significant real effects and that these effects take a few years to be fully realized.
AB - We extend and apply computable general equilibrium methods to the study of economies with both aggregate uncertainty and uninsured household-specific uncertainty. In our economies the government issues two types of assets: a small denomination, non-interest bearing asset, which we call currency, and a large denomination, interest bearing asset, which we call T-bills. We find that a real interest rate behavior similar to that observed in the U.S. can be sustained as equilibrium behavior in our class of economies. We also find that policy induced real interest rate changes that are perceived as being permanent have significant real effects and that these effects take a few years to be fully realized.
KW - Heterogeneous agents
KW - Liquidity constraints
KW - Quantitative general equilibrium
KW - Real returns
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U2 - 10.1016/0014-2921(95)00028-3
DO - 10.1016/0014-2921(95)00028-3
M3 - Article
AN - SCOPUS:0040412750
SN - 0014-2921
VL - 41
SP - 115
EP - 137
JO - European Economic Review
JF - European Economic Review
IS - 1
ER -