nep-dge New Economics Papers
on Dynamic General Equilibrium
Issue of 2006‒03‒05
twelve papers chosen by
Christian Zimmermann
University of Connecticut
  1. Forecasting Performance of an Open Economy Dynamic Stochastic General Equilibrium Model By Mattias Villani; Malin Adolfson; Jesper Linde
  2. Equilibrium Wage Dispersion: An Example By Damien Gaumont; Randall Wright; Martin Schindler
  3. Inequality over the Business Cycle: Estimating Income Risk Using Micro-Data on Consumption By Giorgio Primiceri; Thijs van Rens
  4. Predictable Life-Cycle Shocks, Income Risk and Consumption Inequality By Giorgio E. Primiceri; Thijs van Rens
  5. Aggregate Mortality Risk and the Insurance Value of Annuities By Juha Alho; Niku Määttänen
  6. Organizational Capital and Employment Fluctuations By Thijs van Rens
  7. Can the Standard International Business Cycle Model Explain the Relation Between Trade and Comovement? By M. Ayhan Kose; Kei-Mu Yi
  8. Credit Frictions, Housing Prices and Optimal Monetary Policy Rules By Andrea Pescatori; Caterino Mendicino
  9. Aggregate Implications of Wealth Redistribution: The Case of Inflation* By Matthias Doepke; Martin Schneider
  10. Credit Market Development, Asset Prices and Business Cycle By Caterina Mendicino
  11. Understanding the Evolution of World Business Cycles By M. Ayhan Kose; Christopher Otrok; Charles H. Whiteman
  12. Time Consistent Policy in Markov Switching Models By Fabrizio Zampolli; Andrew Blake
  1. By: Mattias Villani (Sveriges Riksbank); Malin Adolfson (Sveriges Riksbank); Jesper Linde (Sveriges Riksbank)
    Date: 2005–09–03
    URL: http://d.repec.org/n?u=RePEc:mmf:mmfc05:32&r=dge
  2. By: Damien Gaumont; Randall Wright; Martin Schindler
    Keywords: Wages , Labor markets , Economic models ,
    Date: 2006–01–31
    URL: http://d.repec.org/n?u=RePEc:imf:imfwpa:06/19&r=dge
  3. By: Giorgio Primiceri; Thijs van Rens
    Abstract: We use CEX repeated cross-section data on consumption and income, to evaluate the nature of increased income inequality in the 1980s and 90s. We decompose unexpected changes in family income into transitory and permanent, and idiosyncratic and aggregate components, and estimate the contribution of each component to total inequality. The model we use is a linearized incomplete markets model, enriched to incorporate risk-sharing while maintaining tractability. Our estimates suggest that taking risk sharing into account is important for the model fit; that the increase in inequality in the 1980s was mainly permanent; and that inequality is driven almost entirely by idiosyncratic income risk. In addition we find no evidence for cyclical behavior of consumption risk, casting doubt on Constantinides and Duffie’s (1995) explanation for the equity premium puzzle.
    Keywords: Consumption, inequality, risk, incomplete markets, business cycle
    JEL: D12 D31 D52 D91 E21 E32 G10
    Date: 2002–07
    URL: http://d.repec.org/n?u=RePEc:upf:upfgen:943&r=dge
  4. By: Giorgio E. Primiceri; Thijs van Rens
    Abstract: Was the increase in income inequality in the US due to permanent shocks or merely to an increase in the variance of transitory shocks? The implications for consumption and welfare depend crucially on the answer to this question. We use CEX repeated cross-section data on consumption and income to decompose idiosyncratic changes in income into predictable life-cycle changes, transitory and permanent shocks and estimate the contribution of each to total inequality. Our model fits the joint evolution of consumption and income inequality well and delivers two main results. First, we find that permanent changes in income explain all of the increase in inequality in the 1980s and 90s. Second, we reconcile this finding with the fact that consumption inequality did not increase much over this period. Our results support the view that many permanent changes in income are predictable for consumers, even if they look unpredictable to the econometrician, consistent with models of heterogeneous income profiles.
    Keywords: Consumption, inequality, risk, incomplete markets, heterogeneous income profiles
    JEL: D12 D31 D52 D91 E21
    Date: 2006–02
    URL: http://d.repec.org/n?u=RePEc:upf:upfgen:945&r=dge
  5. By: Juha Alho; Niku Määttänen
    Abstract: Future improvements in mortality are difficult to forecast. In this paper, we incorporate uncertainty about future mortality, or aggregate mortality risk, into an otherwise standard life cycle model with an intertemporal consumption-savings decision. The aggregate mortality process is calibrated based on European mortality series. We use the model to quantify the welfare cost of aggregate mortality risk and the extent to which individuals can insure themselves against it using life annuities with a constant payout stream.
    Keywords: annuities, aggregate mortality risk
    JEL: G22 D14
    Date: 2006–02–22
    URL: http://d.repec.org/n?u=RePEc:rif:dpaper:1005&r=dge
  6. By: Thijs van Rens
    Abstract: In this paper I present a model in which production requires two types of labor inputs: regular productive tasks and organizational capital, which is accumulated by workers performing organizational tasks. By allocating more workers from organizational to productive tasks, firms can temporarily increase production without hiring. The availability of this intensive margin of labor adjustment, in combination with adjustment costs along the extensive margin (search frictions, firing costs, training costs), makes it optimal to delay employment adjustments. Simulations indicate that this mechanism is quantitatively important even if only a small fraction of workers perform organizational tasks, and explains why the hiring rate is persistent and why employment is slow to recover after the end of a recession.
    Keywords: Business cycles, labor market, organizational capital, jobless recoveries
    JEL: D92 E24 J41 J64
    Date: 2004–11
    URL: http://d.repec.org/n?u=RePEc:upf:upfgen:944&r=dge
  7. By: M. Ayhan Kose; Kei-Mu Yi
    Date: 2005–11–03
    URL: http://d.repec.org/n?u=RePEc:imf:imfwpa:05/204&r=dge
  8. By: Andrea Pescatori (Universitat Pompeu Fabra); Caterino Mendicino (Stockholm School of Economics)
    Date: 2005–09–03
    URL: http://d.repec.org/n?u=RePEc:mmf:mmfc05:67&r=dge
  9. By: Matthias Doepke (UCLA); Martin Schneider (NYU and Federal Reserve Bank of Minneapolis)
    Date: 2006–02–01
    URL: http://d.repec.org/n?u=RePEc:cla:uclawp:846&r=dge
  10. By: Caterina Mendicino (Stockholm School of Economics)
    Date: 2005–09–03
    URL: http://d.repec.org/n?u=RePEc:mmf:mmfc05:74&r=dge
  11. By: M. Ayhan Kose; Christopher Otrok; Charles H. Whiteman
    Keywords: Business cycles , Globalization , Group of Seven , Economic models ,
    Date: 2005–11–22
    URL: http://d.repec.org/n?u=RePEc:imf:imfwpa:05/211&r=dge
  12. By: Fabrizio Zampolli (Bank of England); Andrew Blake (Bank of England)
    Date: 2005–09–03
    URL: http://d.repec.org/n?u=RePEc:mmf:mmfc05:2&r=dge
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