Does Imperfect Capital Market Dynamically Stabilize Households Asset Holding?
Author InfoHitoshi Tsubouchi Abstract In an economy with infinitely-lived homogeneous and perfect capital market, gross interest rate is determined in equiliibrium as a reciprocal number of households’ subjective discount factor as well known. They consume a constant fraction of their own total human and nonhuman wealth, and their nonhuman wealth does not change. On the other hand if households are heterogeneous, gross interest rate cannot be the same as a reciprocal number of their subjective discount factors any more for most of the households. Then majorities of the households are divided into two types. Those whose subject discount factors are higher than a reciprocal nunmber of gross interest rate, consume more and borrow the possible biggest amount to pay its interests in the long run, while those whose subjective discount factors are lower, consume less, save more for ever and their nonhuman wealth explodes in the long run. But most of households are not like either of them. Thi
