Biographical note: GollierChristian: Christian Gollier is professor of economics at the University of Toulouse and director of the Toulouse School of Economics. He is the author of "The Economics of Risk and Time" and the coauthor of "Economic and Financial Decisions under Risk" (Princeton).

This paper examines aggregate savings in a general equilibrium model where infinitely lived households face volatile (and possibly uncertain) income paths, hold a risk-free asset, and face a liquidity constraint. I first show that the equilibrium capital stock in an economy without uncertainty,...