Journal of Monetary Economics 2015 DOI: 10.1016/j.jmoneco.2015.04.001 View full text
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YiLi Chien, Kanda Naknoi

Abstract: a b s t r a c tThis study proposes that heterogeneous household portfolio choices within a country and across countries offer an explanation for global imbalances. We construct a stochastic growth multi-country model in which heterogeneous agents face the following restrictions on asset trade. First, the degree of US equity market participation is higher than that of the rest of the world. Second, a fraction of households in each country maintains a fixed share of equity in its portfolios. In our calibrated m…

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