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Table 6 The timing of events in a period

From: A neoclassical perspective on Switzerland’s 1990s stagnation

1. Aggregate shocks realize
2. Households and entrepreneurs rent capital and labour to firms. Firms produce consumption goods
3. Households and entrepreneurs receive wage and capital rental payments
  Households transfer income to entrepreneurs
4. Households consume part of their income and store the remainder either via bank deposits or at home
5. Firms use their net worth to obtain loans from financial intermediaries to finance their capital creation projects
6. The idiosyncratic productivity shock \(\omega\) of each entrepreneur is realized. Entrepreneurs sell the newly created capital at price \(q_t\) and repay their loans, or, if \(\omega <{\bar{\omega }}_t\), default and are monitored by financial intermediaries
7. Households obtain lump-sum transfers \(\ddot{\Omega }_t\) and the gross return on deposits and buy capital goods. The non-defaulting entrepreneurs make their consumption-saving decisions