Optimal Saving Under Poisson Uncertainty

This paper studies optimal saving and investment behaviour of a household that can either invest in a riskless or a risky saving technology when risk results from a Poisson process. The focus is on behaviour of households in a general equilibrium setup. Poisson processes are introduced since they allow us to understand and model endogenous cycles jointly with long-run growth. It turns out that a very simple, intuitive and tractable characterization of equilibrium is possible