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- Monetary and Macroprudential Policy Rules in a Model with House Price Booms by Kannan, Prakash/ Rabanal, Pau and Scott, Alasdair M.
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Capital Accumulation in Private Information Economies
Citation Information: Topics in Macroeconomics. Volume 5, Issue 1, Pages –, ISSN (Online) 1534-5998, DOI: 10.2202/1534-5998.1172, December 2005
- Published Online:
This paper provides a general methodology for introducing capital accumulation into economies with private information and heterogeneous agents. The agents operate a stochastic neoclassical production technology with capital and labor input. I study a moral hazard economy with unobservable input (hidden action). I characterize the efficient allocation of capital, labor, and consumption in a stationary recursive competitive equilibrium. The economy is decentralized by the component planner approach developed by Atkeson and Lucas (1995). Accumulation of capital is facilitated by a "capital planner" who serves as a financial intermediary for the component planners. In the unique, feasible and non-degenerate stationary equilibrium, private information lowers the market-clearing interest rate below agents' discount rate.