We analyze a stochastic growth model with lags in the operation of new technologies. Stock values are impacted by news on technological innovations and some other external shocks affecting the economy. Episodes of technology adoption may generate long fluctuations in the aggregate value of...

We address a general equilibrium model with collateralized debt, credit contractions, and financial market segmentation. Restrictions on credit access make borrower’s optimal payment strategies–coupon payment, prepayment, and default–sensitive to idiosyncratic factors, even though the only...

We address a dynamic general equilibrium model where securities are backed by collateralized loans, and borrowers face endogenous liquidity contractions and financial participation constraints. Although the only payment enforcement is the seizure of collateral guarantees, restrictions on credit...

This paper presents a dynamic general equilibrium model with default and collateral requirements. In contrast with previous literature, our model allows for liquidity contractions and general prepayment specifications. We show that liquidity substantially affects credit and prepayment risks, and...

This paper presents a methodology for the formulation and testing of economic growth models. The model selected includes two production sectors with physical and human capital accumulation. These capital stocks are associated with spillover effects in the production of the physical good and in...

In this paper we develop a discretized version of the dynamic programming algorithm and derive error bounds for the approximate value and policy functions. We show that under the proposed scheme the computed value function converges quadratically to the true value function and the computed...

Many well-respected economists have suggested plans for mortgage restructuring built on the idea of share appreciation mortgages, which generate rather complex transactions with conflicting interests between the lender and the homeowner. The 60/40 Plan, however, combines several economic...

In this paper we consider a simple version of the neoclassical growth model, and carry out an empirical analysis of the main determinants of aggregate investment across countries. The neoclassical growth model predicts that aggregate investment may be influenced by income growth, the capital...