Download or read book Essays on Macroeconomic Policies and Household Heterogeneity written by Gergő Motyovszki and published by . This book was released on 2021 with total page 156 pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis is composed of three independent chapters, but all centered around the broader topic of how macroeconomic policies interact with various aspects of household heterogeneity. Monetary Policy and Inequality under Labor Market Frictions and Capital-Skill Complementarity We provide a new channel through which monetary policy has distributional consequences at business cycle frequencies. We show that an unexpected monetary easing increases labor income inequality between high and less-skilled workers. In particular, this effect is prominent in sectors intensive in less-skilled labor, that exhibit high degree of capital-skill complementarity (CSC) and are subject to matching inefficiencies. To rationalize these findings we build a New Keynesian DSGE model with asymmetric search and matching (SAM) frictions across the two types of workers and CSC in the production function. We show that CSC on its own introduces a dynamic demand amplification mechanism: the increase in high-skilled employment after a monetary expansion makes complementary capital more productive, encouraging a further rise in investment demand and creating a multiplier effect. SAM asymmetries magnify this channel. Monetary-Fiscal Interactions and Redistribution in Small Open Economies Ballooning public debts in the wake of the covid-19 pandemic can present monetary-fiscal policies with a dilemma if and when neutral real interest rates rise, which might arrive sooner in emerging markets: policymakers can stabilize debts either by relying on fiscal adjustments (AM-PF) or by tolerating higher inflation (PM-AF). The choice between these policy mixes affects the efficacy of the fiscal expansion already today and can interact with the distributive properties of the stimulus across heterogeneous households. To study this, I build a two agent New Keynesian (TANK) small open economy model with monetary-fiscal interactions. Targeting fiscal transfers more towards high-MPC agents increases the output multiplier of a fiscal stimulus, while raising the degree of deficitfinancing for these transfers also helps. However, precise targeting is much more important under the AM-PF regime than the question of financing, while the opposite is the case with a PM-AF policy mix: then deficit-spending is crucial for the size of the multiplier, and targeting matters less. Under the PM-AF regime fiscal stimulus entails a real exchange rate depreciation which might offset "import leakage" by stimulating net exports, if the share of hand-to-mouth households is low and trade is price elastic enough. Therefore, a PM-AF policy mix might break the Mundell-Fleming prediction that open economies have smaller fiscal multipliers relative to closed economies. Weak Wage Recovery and Precautionary Motives after a Credit Crunch During the economic recovery following the financial crisis many advanced economies saw subdued wage dynamics, in spite of falling unemployment and an increasingly tight labour market. We propose a mechanism which can account for this puzzle and work against usual aggregate demand channels. In a heterogeneous agent model with incomplete markets we endogenize uninsurable idiosyncratic risk through search-and-matching (SAM) frictions in the labour market. In this setting, apart from the usual precautionary saving behaviour, households can self-insure also by settling for lower wages in order to secure a job and thereby avoid becoming borrowing constrained. This channel is especially pronounced for asset-poor agents, already close to the constraint. We introduce a credit crunch into this framework modelled as a gradual tightening of the borrowing constraint (and utilizing a continuous time approach, known as HACT). The perfect foresight transition dynamics feature falling wages despite a tightening labour market and expanding employment. As households suddenly find themselves closer to the borrowing constraint, the increased precautionary motive drives them to accept lower wages in the bargaining process, while firms respond to this by posting more vacancies, leading to a tighter labour market and falling unemployment. If the household deleveraging pressure is persistent enough after the credit crunch, it can explain the weak wage recovery in spite of already stronger aggregate demand.

Download or read book Essays on Household Heterogeneity in Macroeconomics written by Lukas Nord and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis contains four independent essays studying the consequences of household heterogeneity for Macroeconomics. The first chapter studies the implications of household heterogeneity for equilibrium prices. I break with the canonical assumptions of homothetic preferences and the law of one price to show how heterogeneity in consumption baskets and search for price bargains affects posted prices. Analytical results from search theory and empirical evidence from big data on households' grocery transactions show that price distributions respond to the composition of buyers. In a quantitative heterogeneous agent model with endogenous price dispersion for multiple varieties, I find that the response of retailers to households' search effort is quantitatively important to differentiate between inequality in expenditure and consumption. It more than doubles the direct effect of paying more or less given posted prices, which has been the focus of previous literature. Furthermore, I find that household heterogeneity helps to account for the empirical cyclicality of retail prices and markups in response to aggregate shocks, and has implications for the response of prices to redistributive policies. In the second chapter, which is joint work with Annika Bacher and Philipp Grübener, we show how households with two members can insure themselves against the job loss of a primary earner through the labor force entry of a nonparticipating spouse. We document empirically that this margin is predominantly used by young households. In a two-member life cycle model with endogenous arrival rates, human capital accumulation, and extensive-margin labor supply, we explore how differences in labor market opportunities and asset holdings contribute to this pattern. Our findings suggest that the age difference is predominantly explained by better insurance through asset holdings for the old, while differences in arrival rates and human capital play a smaller role. In the third chapter, which is joint work with Caterina Mendicino and Marcel Peruffo, we study differences in the exposure to bank distress along the income distribution. We develop a two-asset heterogeneous agent model with a financial sector and use this framework to show that banking sector losses disproportionately harm low-income households while rich households adjust their savings behavior to profit from fluctuations in asset prices. This is why welfare losses from bank distress are considerably more dispersed than consumption responses. We find the model-implied consumption responses to be in line with empirical evidence on the relationship between bank equity returns and consumption across households. In the forth chapter, I study how wealth holdings can affect households' incentives to form precise expectations about future inflation rates. I document empirically how the dispersion of expectations changes along the wealth distribution and develop a consumption-savings model with costly expectation formation to study implications for the effectiveness of forward guidance policies. I show endogenous expectation formation to significantly lower the effectiveness of forward guidance policies due to selection in which households are paying attention to news about inflation.

Download or read book Essays on Macroeconomics and Household Heterogeneity written by Isaac Gross and published by . This book was released on 2018 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on Macroeconomic Policies in Heterogeneous Agent Models written by Alaïs Martin-Baillon and published by . This book was released on 2021 with total page 256 pages. Available in PDF, EPUB and Kindle. Book excerpt: It is now recognized that the heterogeneity of economic agents plays a crucial role in understanding the fluctuations of an economy. The different chapters of my thesis serve the same question: How does heterogeneity changes the way economic policies should be conducted? Today, heterogeneous-agent macroeconomics is developing in several directions, each shedding different light on the problems we face as economists. My thesis is at the confluence of the different facets of this field. The first chapter of my thesis, participates in the heterogeneous agent macroeconomics that derives analytical solutions in reduced-heterogeneity models. I study how governments should increase or decrease taxes on firms over the business cycle. I show that taking into account firms heterogeneity greatly changes tax policy recommendations. The second chapter of my thesis is part of quantitative heterogeneous agent macroeconomics. We study whether monetary policy should use its ability to redistribute wealth among heterogenous households to achieve its objectives. The third chapter of my thesis participates in field that uses micro data to understand macroeconomics and to design public policies. I estimate firms' propensities to invest to better understand how economic policies can vary firms' investment by varying their income.

Download or read book Essays in Macroeconomics and the Role of Household Heterogeneity in the Great Recession written by Kieran P. Larkin and published by . This book was released on 2019 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis studies the role that household heterogeneity plays in macroeconomic dynamics. It tackles this topic by focusing on consumption behaviour during the Great Recession. Its overarching argument is threefold: Firstly, that heterogeneity is crucial for understanding the patterns observed in the data. Secondly, that the state of the economy and preceding environment has a first order impact on how the economy responds to shocks. Thirdly, inaction and illiquidity matter and by focusing on this margin we can gain a better understanding of consumer behaviour. In the three chapters I consider the role that labor market sorting, household portfolio choice, shocks to the availability of credit, and changes in the future path of expected income played in understanding the Great Recession. The first chapter investigates the role that labor market tranquillity prior to the Great Recession played in the magnitude of the subsequent consumption decline. It highlights the interaction between labor market sorting and the household portfolio choice in the determination of the economy"s response to shocks. The second chapter looks at the role of credit conditions in household consumption dynamics. It argues that much of the literature has misunderstood the effect of a decline in credit availability during the Great Recession. It instead emphasizes the inaction response generated due to a tightening of the collateral constraint, which provides a better account of the Great Recession and of the borrowing behaviour of households in the micro data. The final chapter focuses on the car market and car purchasing behaviour during the last three US recessions, documenting important unusual features of the consumption response during the Great Recession. It uses these responses as an identification mechanism to uncover the importance of the shocks hitting the economy during the crisis, finding an important role for asset price shocks and a decline in the expected growth rate of household incomes in replicating the consumption dynamics.

Download or read book Essays in Macroeconomics with Household and Policy Heterogeneity written by Johannes Fleck and published by . This book was released on 2021 with total page 180 pages. Available in PDF, EPUB and Kindle. Book excerpt: The first chapter of this thesis is "State Tax and Transfer Progressivity and the Consumption Response to Fiscal Stimulus". It studies the relationship between tax policies of US state governments and the marginal propensity to consume (MPC) out of stimulus checks. For the 2001 and 2008 stimulus episodes, I document striking regional discrepancies; the household average MPC in states with the most regressive taxes and transfers was between 23 and 59 cents per Dollar received but no different from zero in progressive states. I do not find evidence that other state policies, such as labor and credit market policies, or exogenous differences in earnings risk contribute to explaining MPC cross-state discrepancies. The second chapter "Federal, State and Local Tax Progressivity", coauthored with J. Heathcote, K. Storesletten and G. Violante, measures the progressivity of taxes and transfers for each of the US states and compares it to federal progressivity. Our findings are twofold. First, most nonfederal taxes, especially property taxes, are regressive. Second, state and local tax regressivity varies substantially; states which have more progressive tax and transfer systems tend to be Democrat-leaning, to be more ethnically diverse and to have lower income polarization. The third chapter "The Tax Progressivity of the Fifty Nifty: Evidence from America's Working Poor", coauthored with C. Simpson-Bell explores how insurance against transitory earnings shocks for households with low in- comes varies across US states. We overcome limitations in survey data by constructing a micro simulation model to measure the combined response of federal and state income taxes and transfers to a shock to pre-tax earnings. We account for the geographic uniformity of federal policies as well as regional variation in income distributions, price levels and net transfer policies of state governments. Our findings document large geographic differences in marginal tax rates faced by low-income households.

Download or read book Essays on Macroeconomics with Heterogeneity and Inequality written by Zhigang Ge and published by . This book was released on 2020 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Abstract Chapter 1. Heterogeneous Entrepreneurial Ability and Wealth Inequality Models with entrepreneurship can reproduce high wealth concentration at the top. The key assumption is the borrowing constraint, that is, households are unable to borrow enough assets to start a business or invest optimally in the business. However, some empirical evidences show that borrowing constraint does not matter for the majority of households in the US. This paper seeks to generate high wealth concentration at the top without assuming borrowing constraint. The baseline model that introduces heterogeneity in entrepreneurial ability is able to match the wealth distribution while the model assuming same entrepreneurial ability fails. Besides wealth distribution, the baseline model generates other moments that are consistent with the data. Chapter 2. Taxing Top Earners: The Role of Entrepreneurs This paper studies the optimal top marginal income tax rate in a quantitative framework with entrepreneurial choice, financing constraints, and realistic earnings and wealth distributions. I find that the revenue-maximizing top tax rate is approximately 41 percent -- close to the recent levels in the US. In contrast, when calibrated with only workers to match realistic earnings and wealth distributions, the model predicts a revenue-maximizing top tax rate of 81 percent -- close to the established view. There are two channels through which the baseline model has a lower revenue-maximizing top tax rate. First, the wealth distribution channel: increasing the top tax rate decreases wealth accumulation and leads to a less skewed wealth distribution in the long run (there are more top entrepreneurs with low wealth and less top entrepreneurs with high wealth). With financing constraints, there is a similar change in the business earnings distribution, implying a fall in the average business earnings at the top. Second, the general equilibrium effect on labor earnings of workers: in the model with entrepreneurs, increasing the top tax rate reduces the capital stock much more than labor supply, which decreases the capital-labor ratio and thus the equilibrium wage rate in the model economy. Finally, I find that the welfare-maximizing top marginal income tax rate is close to the revenue-maximizing one. Chapter 3. Household Heterogeneity and Consumption Amplification Macroeconomic models with household heterogeneity in wealth can generate larger consumption response to aggregate shocks compared to a representative-agent economy. In other words, there is consumption amplification associated with wealth heterogeneity. However, I find that in a Krusell-Smith type real business cycle (RBC) model, this amplification effect is only significant at the onset of a recession and gradually dies out as the recession proceeds. The finding is of interest because part of the motivation for the widely adoption of models with wealth heterogeneity is their different and empirically plausible implications for consumption dynamics compared with representative-agent models. I then introduce household heterogeneity in housing and find that the model with housing has more persistent amplification effect on consumption during the recession.

Download or read book Essays in macroeconomic theory and optimal policies written by Boris Chafwehé and published by Presses universitaires de Louvain. This book was released on 2021-04-01 with total page 238 pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis contributes to modern macroeconomic theory. It is composed of three chapters that investigate the role of household heterogeneity and the design of monetary and fiscal policies in shaping macroeconomic outcomes. The first chapter studies the link between labour market risks and equilibrium in the market for durable goods. It develops a quantitative model in which households optimally choose nondurable consumption, the accumulation of durable goods, and holdings of financial assets. The model is used to show that, when unemployment risk increases, precautionary savings motives and the implied portfolio rebalancing towards liquid assets lead to decreases in the resale price of durables, a feature that is consistent with empirical observations. The second chapter investigates the properties of optimal taxes and transfers in a framework where household heterogeneity is explicitly accounted for. We describe how the introduction of heterogeneity alters the prescriptions of the model when compared to its representative agent counterpart. We also propose an empirical application of the theory to show that heterogeneity brings the model predictions closer to their counterpart in the data. The third chapter proposes a framework of optimal monetary policy in the case where government debt sustainability may be a constraint for the central bank. In the case where optimal policy exhibits «debt concerns» monetary policy becomes subservient to fiscal policy, and needs to partially give up on the objective of stabilizing inflation and the output gap. We link our results to the ones obtained in the literature on monetary and fiscal policy interactions, in which policies are usually summarized by exogenous feedback-rules. Applications of our theory to concrete policy scenarios are also provided.

Download or read book Essays on Macroeconomic Theory Optimal Fiscal Policy and History of Macroeconomics written by François Courtoy and published by Presses universitaires de Louvain. This book was released on 2022-08-04 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis contributes to two fields of macroeconomics. The first two chapters contribute to the literature that investigates the role of household heterogeneity, in terms of marginal propensity to consume and labor income, for the 'optimal' design of fiscal policies. The first chapter explores how the introduction of household heterogeneity alters the prescriptions derived from the standard optimal fiscal policy framework that only accounts for a representative agent. When heterogeneity is accounted for the government uses taxation and transfers as a redistributing device that only partially corrects for fluctuations in income inequality. The second chapter builds on the results of the first. It develops a quantitative model that is estimated with US data on income and consumption dispersion among households. The model is then used to assess the relevance of the actual US fiscal policy. Unexpectedly, it concludes that the US fiscal policy is close to optimal. The third chapter contributes to the literature that is at the crossroad of the fields of history of macroeconomics and of macroeconomic pedagogy. It aims at reflecting on the theory used in the first two chapters of the thesis and in the teaching of macroeconomics. It identifies and discuss the deep methodological discrepancy between the theory used in research and graduate macroeconomics courses, on the one hand, and in undergraduate macroeconomic courses, in the other hand.

Download or read book Essays on Agent Heterogeneity in Macroeconomics written by Jose Luis Luna Alpizar and published by . This book was released on 2016 with total page 193 pages. Available in PDF, EPUB and Kindle. Book excerpt: Heterogeneous agents models have become the norm in modern macroeconomics as the limitations of the representative-agent paradigm and the importance of studying household heterogeneity grow in recognition. Agent heterogeneity may not only be important to accurately capture the description of an aggregate equilibrium. Also, the representative agent assumption may hide many distributional effects and therefore could change the answer to many normative questions usually given by representative agent models.This dissertation contains three chapters exemplifying ways in which the consideration of heterogeneous agents in the modelling of macroeconomic phenomena has important repercussions for the predictions of the model and its normative implications. Chapters 1 and 2 show the importance of accounting for worker heterogeneity in the analysis of labor markets. Chapter 1 presents a search and matching model of unemployment with heterogeneous workers which's main features, are ex-ante worker heterogeneity and undirected search. These features enable the model to replicate the empirical correlations between labor market outcomes and proxy variables for worker productivity. The model displays job rationing, which makes it useful to understand the high levels of unemployment observed in deep recessions. It also constitutes a versatile tool for the analysis of several labor-market aspects in which worker heterogeneity could play an important role, such as the impact of employment policies that are believed to have asymmetric effects across the labor force.Chapter 2 provides an example of such applications by analyzing the effects of increments of a minimum wage. It explores theoretically and empirically the notion that minimum wages affect low-skill workers asymmetrically due to productivity differences. Using the model presented in chapter 1, with the incorporation of endogenous search intensity to account for the effects that minimum wages could have on worker participation, I show that a rising minimum wage lowers the employment and labor force participation of low-productivity workers by pricing them out of the market, while it increases the employment, participation, and wages of more productive workers that remain hirable. Chapter 2 also contains an empirical analysis that investigates and ultimately validates the model's predictions of changes in the minimum wage. Within the labor market for low-education (high school or lower) workers, increments in the minimum wage have diametrically opposed effects: they reduce the employment and labor force participation of teenagers with less than high school education, while increasing the employment and labor force participation of mature workers with high school educational attainment. A calibrated version of the model targeting the low-education labor market shows that, despite its opposite effects across the labor force, an increase in the minimum wage negatively impacts aggregate employment, labor force participation, and social welfare.Chapter 3 investigates the existence of complex dynamics in the behavior of exchange rates due heterogeneity in the expectations of their future value. A simple model of exchange rate dynamics featuring traders with heterogeneous expectations is introduced. The model is based on the asset pricing model in Brock and Hommes (1998) and features the BNN dynamic presented in Brown et al. (1950), a dynamic with desirable properties absent in other dynamics used in the literature. The chapter shows that even this simple model can easily generate complex and even chaotic dynamics in the exchange rate because of the interaction of traders with different beliefs. An important implication is that long-term exchange rate prediction is, in theory, difficult.

Download or read book Essays on Macroeconomics with Heterogeneous Agents written by Kyooho Kwon and published by . This book was released on 2013 with total page 84 pages. Available in PDF, EPUB and Kindle. Book excerpt: "Chapter 1 develops a heterogeneous-agent general equilibrium model that incorporates both intensive and extensive margins of labor supply. A nonconvexity in the mapping between time devoted to work and labor services distinguishes between extensive and intensive margins. We consider calibrated versions of this model that differ in the value of a key preference parameter for labor supply and the extent of heterogeneity. The model is able to capture the key features of the empirical hours worked distribution, including how individuals transit within this distribution. We then study how the various specifications influence labor supply responses to temporary shocks and permanent tax changes, with a particular focus on the intensive and extensive margin elasticities in response to these changes. We find important interactions between heterogeneity and the extent of curvature in preferences. Chapter 2 builds a model of family labor supply in which individuals choose between full-time work, part-time work, and nonemployment. The model is calibrated to replicate the movements of both male and female workers among these states. The willingness to substitute hours over time (the so-called intertemporal elasticity of labor supply) is critical for many economic analysis. A common strategy for uncovering the value of this willingness is to carry out structural estimation on micro panel data. One general issue in this estimation exercises using micro data is that misspecification of the constraints that individuals face is likely to influence inference about preference parameters. In the model economy, although the individual labor supply problem is a discrete choice problem, individuals are able to adjust hours along the intensive margin by moving between part-time and fulltime work. Intuitively, adjustment along the intensive margin potentially allows one to estimate the true value of the underlying curvature parameter describing the utility from leisure. We explore the extent to which standard labor supply methods can achieve this in our setting. Although these methods deliver precise estimates that are significantly different from zero, the estimates are effectively unrelated to the true underlying values. These methods also deliver elasticity estimates for women, even when the underlying preference parameters are the same for men and women. Chapter 3 investigates the optimal progressive tax code in an incomplete-market economy in which households are linked intergenerationally by altruism and earning ability. The model economy is calibrated to that of the US with the progressive tax code suggested by Gouviea and Strauss (1994). First, I compute the equilibrium with the optimal progressive tax code. Second, I investigate the extent to which the size of government welfare programs affects the optimal progressivity of the income tax code. I find that the optimal tax code for an economy populated with altruistic households is approximately equivalent to a proportional tax of 23.1% with a fixed deduction of approximately $17,000 in 1990 US dollars. For an economy populated with non-altruistic households, however, these numbers are 18.8% and $12,000 respectively. This result implies that inequality is more severe in an economy with intergenerational links so that the policy maker requires a more progressive tax system to provide insurance. Additionally, I find that when the size of the government welfare program is chosen carefully, the additional insurance benefits from the progressive income tax code disappear"--Pages iv-v.

Download or read book Essays on Macroeconomics with Heterogeneous Regions written by Chang Liu and published by . This book was released on 2020 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation studies macroeconomics with regional heterogeneity in three general dimensions. First, it documents some novel empirical patterns of regional heterogeneity (in Chapter 1, 2, 3). Second, these empirical facts are used to identify key economic forces underlying theoretical models (in Chapter 1 and 3). Third, aggregate implications of regional heterogeneity are also studied (in Chapter 1). In the first chapter of this dissertation, I highlight time-varying regional risk and federal fiscal transfer policy as two competing forces driving regional risk sharing over the business cycle and in turn quantify their impacts on aggregate fluctuations. I find that during an economic downturn, increased regional risk worsens risk sharing and amplifies the impact of aggregate productivity shocks. However, state-contingent federal government transfers provide additional risk sharing and help stabilize the aggregate economy, by providing insurance to the regions that need it the most. In the second chapter (joint with Noah Williams), we first estimate a quarterly dataset for state-level aggregates by building a novel empirical framework that allows for mixed-frequency raw data with measurement errors. We then apply this dataset to study the monetary policy effects at the state levels. We find that states behave remarkably homogeneous with each other in their responses of output and price to an unanticipated monetary policy shock. In the third chapter (joint with Noah Williams), we use the state-level quarterly dataset to analyze the impact of unexpected changes in federal personal and corporate income taxes. We find substantial heterogeneity in the impact of federal fiscal policy across states, with more than half having no significant response to the tax cuts. In addition, less capital-intensive states have larger responses to corporate tax cuts. Although puzzling in standard models, a model with corporate and non-corporate sectors is consistent with this evidence. Overall, our results suggest the importance of variation and reallocation across states in evaluating federal policy.

Download or read book Essays in Heterogeneity in Macroeconomics written by Minsu Chang and published by . This book was released on 2019 with total page 260 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation consists of two chapters that explore how micro-level heterogeneity helps us understand the dynamics of macroeconomic variables. Chapter 2 shows that the evolving likelihood of marriage and divorce is an essential factor in accounting for the changes in housing decisions over time in the United States. I build and estimate a life-cycle model of single and married households who face exogenous age-dependent marital transition shocks and then conduct a decomposition analysis between 1970 and 1995. The results show that household formation shocks could account for about 30% of the increase in the single's homeownership rate and play a crucial role in generating the observed sign of change in portfolio share of married households. The extended analysis on recent years after 1995 shows that the continuing decrease in marriage prospects contributed to push up the single's homeownership rate during the housing boom in the mid 2000s. Chapter 3 develops a state-space model with a state-transition equation that takes the form of a functional vector autoregression and stacks macroeconomic aggregates and a cross-sectional density. The measurement equation captures the error in estimating log densities from repeated cross-sectional samples. The log densities and the transition kernels in the law of motion of the states are approximated by sieves, which leads to a finite-dimensional representation in terms of macroeconomic aggregates and sieve coefficents. We illustrate how the model works based on the simulation of the Krusell-Smith economy and conduct an empirical analysis on the joint dynamics of technology shocks, per capita GDP, employment rates, and the earnings distribution.

Download or read book Essays in Heterogeneous Agent Macroeconomics written by Nobuhide Okahata and published by . This book was released on 2021 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: In these essays, I study the implications of macroeconomic policies under the environment with rich heterogeneities of economic agents. The analyses in these essays highlight that income and wealth inequality among agents could change the responses of macroeconomic policies and large aggregate shocks from those in the representative agent models. These results could modify our understanding of economic dynamics and the effect of macroeconomic policies. As an illustration, I focus on the monetary policy in a closed economy model and capital controls in an open economy model. I also develop a new nonlinear and global numerical solution method to analyze a class of heterogeneous-agent macroeconomic models. In the first chapter, ''An Alternative Solution Method for Continuous-Time Heterogeneous Agent Models with Aggregate Shocks'', I propose an alternative solution method for continuous-time heterogeneous agent models with aggregate shocks by extending the Backward Induction method developed initially for discrete-time models by Reiter (2010). The existing methods commonly used in the literature essentially rely on the local linearization and are only applicable to the problems where certainty equivalence with respect to aggregate shocks holds. On the other hand, the proposed method is nonlinear and global with respect to both idiosyncratic and aggregate shocks and thus suitable to investigate models where large aggregate shocks exist or nonlinearity matters. I apply this method to solve a Krusell and Smith (1998) economy and evaluate its performance along two dimensions: accuracy and computation speed. I find that the proposed method is accurate even with large aggregate shocks and high curvature without surrendering computation speed (the baseline economy is solved within a few seconds). This new method is also applied to a model with recursive utility and an Overlapping Generations (OLG) model, and it is able to solve both models quickly and accurately. In the second chapter, ''Consumption Inequality and Monetary Policy in a Heterogeneous-Agent New Keynesian Model'', I consider a continuous-time heterogenous-agent New Keynesian model with the wealth effect of the labor supply and study quantitative implications of additional insurance mechanisms available to the households. Our numerical experiment illustrates cross-sectional consumption inequality increases after a contractionary monetary policy shock which is consistent with the previous empirical result while it contradicts with predictions of the model without the wealth effect of the labor supply. Furthermore, consumption response to contractionary monetary policy shock is dampened, and a cross-sectional average of utilities decreases while the opposite is true in the model without wealth effect. These results suggest that propagation of monetary policy shock to the aggregate variables and welfare depends critically on additional insurance instruments available to agents. The third chapter, ''Capital Controls under Income Heterogeneity'', studies the welfare implication of capital controls under the small open economy model with the idiosyncratic income risks and the borrowing constraints. A calibrated model computes the change in welfare for different levels of capital controls. Compared to the recent studies, welfare gain of capital controls becomes small under agent income heterogeneity. For the economy with low borrowing capacity, capital controls become more effective compared to the baseline case.

Download or read book Essays on Macroeconomics Monetary Policy and Firm Heterogeneity written by Claire Thürwächter and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Macroeconomics and Household Heterogeneity written by Dirk Krueger and published by . This book was released on 2016 with total page 86 pages. Available in PDF, EPUB and Kindle. Book excerpt: The goal of this chapter is to study how, and by how much, household income, wealth, and preference heterogeneity amplify and propagate a macroeconomic shock. We focus on the U.S. Great Recession of 2007-2009 and proceed in two steps. First, using data from the Panel Study of Income Dynamics, we document the patterns of household income, consumption and wealth inequality before and during the Great Recession. We then investigate how households in different segments of the wealth distribution were affected by income declines, and how they changed their expenditures differentially during the aggregate downturn. Motivated by this evidence, we study several variants of a standard heterogeneous household model with aggregate shocks and an endogenous cross-sectional wealth distribution. Our key finding is that wealth inequality can significantly amplify the impact of an aggregate shock, and it does so if the distribution features a sufficiently large fraction of households with very little net worth that sharply increase their saving (i.e. they are not hand-to mouth) as the recession hits. We document that both these features are observed in the PSID. We also investigate the role that social insurance policies, such as unemployment insurance, play in shaping the cross-sectional income and wealth distribution, and through it, the dynamics of business cycles.

Download or read book Essays in Quantitative Macroeconomics Business Cycles Household Heterogeneity and Model Advancements written by Ekaterina Shabalina and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: