This paper studies the aggregate implications of imperfect risk-sharing implied by a class of New Keynesian models with … idiosyncratic income risk and incomplete financial markets. The models in this class can be equivalently represented as an economy … representative-agent economy to perform counterfactuals. We find that deviations from perfect risk-sharing were an important …

This paper studies the aggregate implications of imperfect risk-sharing implied by a class of New Keynesian models with … idiosyncratic income risk and incomplete financial markets. The models in this class can be equivalently represented as an economy … representative-agent economy to perform counterfactuals. We find that deviations from perfect risk-sharing were an important …

We discover sentiment-driven equilibria in popular models of imperfect risk sharing. In these equilibria, sentiment …-price declines; (ii) assetprice booms, with below-average risk premia, predict busts and financial crises. Methodologically, our …

The paper reports the outcome of the stress-testing of liquidity risk in the TARGET2 payment system, with the study …