Wealth dynamics in a bond economy with heterogeneous beliefs

Timothy Cogley, Thomas Sargent, Viktor Tsyrennikov

    Research output: Contribution to journalArticle

    Abstract

    Two types of agents have diverse beliefs about the law of motion for an exogenous endowment. One knows the true process, and the other learns about it via Bayes' theorem. Financial market structure affects the dynamics of the wealth distribution. When markets are complete, the learning agent loses wealth, as in Blume and Easley (2006). The absence of markets for some Arrow securities alters the direction in which wealth is transferred. When the only traded asset is a risk-free bond, the learning agent accumulates wealth, both agents survive and the more knowledgeable agent is driven to his debt limit.

    Original languageEnglish (US)
    Pages (from-to)1-30
    Number of pages30
    JournalEconomic Journal
    Volume124
    Issue number575
    DOIs
    StatePublished - 2014

    Fingerprint

    Wealth dynamics
    Heterogeneous beliefs
    Wealth
    Bayes' theorem
    Financial markets
    Debt
    Endowments
    Wealth distribution
    Assets
    Market structure

    ASJC Scopus subject areas

    • Economics and Econometrics

    Cite this

    Wealth dynamics in a bond economy with heterogeneous beliefs. / Cogley, Timothy; Sargent, Thomas; Tsyrennikov, Viktor.

    In: Economic Journal, Vol. 124, No. 575, 2014, p. 1-30.

    Research output: Contribution to journalArticle

    Cogley, T, Sargent, T & Tsyrennikov, V 2014, 'Wealth dynamics in a bond economy with heterogeneous beliefs', Economic Journal, vol. 124, no. 575, pp. 1-30. https://doi.org/10.1111/ecoj.12041
    Cogley, Timothy ; Sargent, Thomas ; Tsyrennikov, Viktor. / Wealth dynamics in a bond economy with heterogeneous beliefs. In: Economic Journal. 2014 ; Vol. 124, No. 575. pp. 1-30.
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