Calibration of Precautionary Saving Models for Iran Economy

Document Type : Research Paper

Authors

1 Assistant Professor of Economics, Yasouj University

2 Associate Professor of Economics University of Isfahan

3 Associate Professor of Statistics, University of Isfahan

Abstract

The main question of this paper is that which interest rate value assures existence and optimality of equilibrium, in an environment that we have only precautionary demand for money and assets. This environment has two properties: heterogeneous agents and incomplete markets. In this environment, agents hold precautionary savings (in form of a single asset such as fiat currency, credit, and capital) for self-insurancing themselves against idiosyncratic income fluctuations. Bewley models are formed in this environment. In this paper, we calibrate this model for Iran economy and show that when agents have access to the fiat currency or credit, these results are true. The main question of this paper is that which interest rate value assures existence and optimality of equilibrium, in an environment that we have only precautionary demand for money and assets. This environment has two properties: heterogeneous agents and incomplete markets. In this environment, agents hold precautionary savings (in form of a single asset such as fiat currency, credit, and capital) for self-insurancing themselves against idiosyncratic income fluctuations. Bewley models are formed in this environment. In this paper, we calibrate this model for Iran economy and show that when agents have access to the fiat currency or credit, these results are true.

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References

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Quarterly Journal of Applied Theories of Economics
Volume 5, Issue 3 - Serial Number 18
December 2018
Pages 213-238

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