This paper by Mark Huggett explores the low average, real, risk-free interest rate in heterogeneous-agent, incomplete-insurance economies. The author constructs a model where agents experience idiosyncratic shocks and smooth consumption through credit balances, with a borrowing limit to prevent excessive credit accumulation. The calibrated economy generates a risk-free interest rate below those of comparable representative-agent economies. The paper uses computational methods to characterize equilibria and examines the sensitivity of results to changes in parameters, such as the coefficient of relative risk aversion. The findings suggest that restrictive credit limits and higher risk aversion lead to lower risk-free rates. The study also discusses the implications for understanding the risk-free rate puzzle and potential extensions to the model.This paper by Mark Huggett explores the low average, real, risk-free interest rate in heterogeneous-agent, incomplete-insurance economies. The author constructs a model where agents experience idiosyncratic shocks and smooth consumption through credit balances, with a borrowing limit to prevent excessive credit accumulation. The calibrated economy generates a risk-free interest rate below those of comparable representative-agent economies. The paper uses computational methods to characterize equilibria and examines the sensitivity of results to changes in parameters, such as the coefficient of relative risk aversion. The findings suggest that restrictive credit limits and higher risk aversion lead to lower risk-free rates. The study also discusses the implications for understanding the risk-free rate puzzle and potential extensions to the model.