I propose a simple method to solve a heterogeneous agent model with entrepreneurship, financial frictions and aggregate uncertainty. Aggregate shocks, in this context, induce potential entrepreneurs to save in order to ...

Why are bubbles harmful to the economy? According to a recent literature on rational bubbles, the problem is the burst that causes a misallocation of funds and triggers a recession. This paper proposes a theory of rational ...

Using a heterogeneous agent model with incomplete markets and entrepreneurship, I show that development banks can generate significant and positive impacts in an economy if they target the infrastructure sector and are ...