E20

We study the macroeconomic implications of time-varying precautionary saving within a general equilibrium model with borrowing constraint and both aggregate shocks

We develop a dynamic stochastic general equilibrium model with an heterogeneous banking sector. We introduce endogenous default probabilities for both firms and banks, and allow for bank regulation and liquidity injection into the interbank market.

We explore the long and short run relationship between private consumption, disposable income and housing and financial wealth approximated by price indices for a panel of industrialized countries. Consumption, income and wealth are cointegrated in their common, but not in their idiosyncratic components.