|
on Dynamic General Equilibrium |
| By: | Fanti, Luciano; Gori, Luca |
| Abstract: | This paper investigates the steady state and dynamical effects of two historical alternatives as a means of old-age insurance – i.e., voluntary intra-family transfers from young to old members versus pay-as-you-go public pensions –, in a general equilibrium overlapping generations model with children as a desirable good. It is shown that the shift from a private system of old-age insurance to a public system of social security increases GDP per worker. Moreover, although in both cases the dynamics of capital, under myopic expectations, may be globally unstable depending on the size of the (private as well as public) inter-generational transfer, we show that such a shift significantly reduces, for plausible economies, the risk of cyclical instability which otherwise would be dramatically high, especially in countries with high degree of parsimony and low preference for children. |
| Keywords: | Endogenous fertility; Myopic foresight; OLG model; Private old-age support; Public PAYG pensions |
| JEL: | H55 J14 J18 J26 C62 |
| Date: | 2010–02–16 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:20727&r=dge |
| By: | Strid, Ingvar (Dept. of Economic Statistics, Stockholm School of Economics); Giordani, Paolo (Research division, Sveriges Riksbank); Kohn, Robert (Australian School of Business, University of New South Wales) |
| Abstract: | Bayesian inference for DSGE models is typically carried out by single block random walk Metropolis, involving very high computing costs. This paper combines two features, adaptive independent Metropolis-Hastings and parallelisation, to achieve large computational gains in DSGE model estimation. The history of the draws is used to continuously improve a t-copula proposal distribution, and an adaptive random walk step is inserted at predetermined intervals to escape difficult points. In linear estimation applications to a medium scale (23 parameters) and a large scale (51 parameters) DSGE model, the computing time per independent draw is reduced by 85% and 65-75% respectively. In a stylised nonlinear estimation example (13 parameters) the reduction is 80%. The sampler is also better suited to parallelisation than random walk Metropolis or blocking strategies, so that the effective computational gains, i.e. the reduction in wall-clock time per independent equivalent draw, can potentially be much larger. |
| Keywords: | Markov Chain Monte Carlo (MCMC); Adaptive Metropolis-Hastings; Parallel algorithm; DSGE model; Copula |
| JEL: | C11 C63 |
| Date: | 2010–02–14 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:hastef:0724&r=dge |
| By: | Williamson, Stephen; Sanches, Daniel |
| Abstract: | We study the interplay among imperfect memory, limited commitment, and theft, in an environment that can support monetary exchange and credit. Imperfect memory makes money useful, but it also permits theft to go undetected, and therefore provides lucrative opportunities for thieves. Limited commitment constrains credit arrangements, and the constraints tend to tighten with imperfect memory, as this mitigates punishment for bad behavior in the credit market. Theft matters for optimal monetary policy, but at the optimum theft will not be observed in the model. The Friedman rule is in general not optimal with theft, and the optimal money growth rate tends to rise as the cost of theft falls. |
| Keywords: | Money; Credit; Limited Commitment; Monetary Policy |
| JEL: | E5 E4 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:20690&r=dge |
| By: | Wakefield, M.J. |
| Abstract: | This thesis presents analyses of households' decisions regarding housing and pension wealth accumulation, in forward-looking models. The first of three chapters on housing presents a model of housing demand over the life cycle, and examines its sensitivity to prices and borrowing constraints. Demand responses can be unusual: when the price of housing goes up, the demand for starter homes may increase if enough people "downsize" their homes. The next chapter involves carefully matching a life cycle model of consumption and housing choices, to recent episodes in the U.K., and using this structure to understand why house prices and consumption growth are strongly positively correlated. The model provides a good match to data on home ownership and consumption growth. The analysis gives a firmer theoretical footing to the claim that wealth effects from house prices are unlikely to have been the main driver of the correlation with consumption growth. The third housing chapter presents a model in which the prices of two types of home are endogenous. A perfect foresight set up is used, and transitions between steady states following shocks to income and mortgage markets, are studied. The findings suggest that credit shocks are more promising than income shocks as a potential explanation of large house price fluctuations and housing transactions level that covary positively with prices. The final substantive chapter uses a difference-in-differences strategy to evaluate the effect on private pension coverage of a recent U.K. reform to private pensions and pension contribution limits The reform is seen to have had a positive effect on pension coverage for lower earners. This pattern is consistent with forward-looking responses to the financial incentives involved. |
| Date: | 2009–04 |
| URL: | http://d.repec.org/n?u=RePEc:ner:ucllon:http://eprints.ucl.ac.uk/15813/&r=dge |
| By: | Ryouichi Ikeda (Graduate School of Economics, Osaka University) |
| Abstract: | Research was conducted concerning the effects of child support. Many earlier studies have assumed full employment. However, in the real economy, there is unemployment. The relation between the number of children in the economy and unemployment was investigated. The overlapping generation model with involuntary unemployment was used because wages were set by labor unions. First, in the analytical research, it was found that the wage tax for child support and unemployment insurance both increased unemployment and that the wage tax for child support decreased equilibrium capital stock. Also, the wage tax for unemployment insurance reduced the number of the children in the economy. Second, a simulation was conducted, which revealed that there is a tax rate at which the number of the children is maximized. At tax rates for child support higher than this maximum, any increase in the tax rate for child support decreases the number of the children! The conclusion showed that tax rates for child support that are too high have a diminishing effect and policy makers should consider the effects of the wage tax for child support and unemployment. |
| Keywords: | overlapping generation model, involuntary unemployment, child support |
| JEL: | J13 J64 J51 |
| Date: | 2010–02 |
| URL: | http://d.repec.org/n?u=RePEc:osk:wpaper:1005&r=dge |
| By: | Ester Faia; Wolfgang Lechthaler; Christian Merkl |
| Abstract: | Several contributions have recently assessed the size of fiscal multipliers both in RBC models and New Keynesian models. None of the studies considers a model with frictional labour markets which is a crucial element, particularly at times in which much of the fiscal stimulus has been directed toward labour market measures. We use an open economy model (more specifically a currency area calibrated on the EMU) with labour market frictions in the form of labour turnover costs and workers’ heterogeneity to measure fiscal multipliers. We compute short and long run multipliers and open economy spillovers for five types of fiscal packages: pure demand stimuli and consumption tax cuts return very small multipliers; income tax cut and hiring subsidies deliver larger multipliers as they reduce distortions in sclerotic labour markets; short-time work (German "Kurzarbeit") returns negative short-run multipliers, but stabilises employment. Our model highlights a novel dimension through which multipliers operate, namely the labour demand stimulus which occurs in a model with non-walrasian labour markets |
| Keywords: | Fiscal multipliers, fiscal packages, labour market frictions |
| JEL: | E62 H30 J20 H20 |
| Date: | 2010–02 |
| URL: | http://d.repec.org/n?u=RePEc:kie:kieliw:1592&r=dge |
| By: | Kikuchi, Toru; Marjit, Sugata |
| Abstract: | We propose a two-country growth model of intermediate business-services trade that captures the role of time zone differences. It is shown that a time-saving improvement in intermediate business-services trade involving production in different time zones can have a permanent impact on productivity. |
| Keywords: | Business-Services Trade; Time Zone Differences; Growth; AK model |
| JEL: | F11 |
| Date: | 2010–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:20748&r=dge |
| By: | Williamson, Stephen |
| Abstract: | A model of monetary exchange with private financial intermediation is constructed. Claims on financial intermedaries of two types are traded in transactions: circulating notes and deposits. There can be a role for the government in supplying liqudity, and level changes in the money supply accomplished through open market operations can be nonneutral. A Friedman rule is suboptimal, due to costs of maintaining the stock of currency. The model is used to address some issues related to current monetary policy in the United States. |
| Keywords: | Monetary policy; financial intermediation; financial crisis |
| JEL: | E5 E4 |
| Date: | 2009–12 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:20692&r=dge |
| By: | Caliendo, Marco (IZA); Cobb-Clark, Deborah A. (Australian National University); Uhlendorff, Arne (University of Mannheim) |
| Abstract: | Standard job search theory assumes that unemployed individuals have perfect information about the effect of their search effort on the job offer arrival rate. In this paper, we present an alternative model which assumes instead that each individual has a subjective belief about the impact of his or her search effort on the rate at which job offers arrive. These beliefs depend in part on an individual's locus of control, i.e., the extent to which a person believes that future outcomes are determined by his or her own actions as opposed to external factors. We estimate the impact of locus of control on job search behavior using a novel panel data set of newly-unemployed individuals in Germany. Consistent with our theoretical predictions, we find evidence that individuals with an internal locus of control search more and that individuals who believe that their future outcomes are determined by external factors have lower reservation wages. |
| Keywords: | job search behavior, search effort, reservation wage, locus of control, unemployment duration |
| JEL: | J64 |
| Date: | 2010–02 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp4750&r=dge |
| By: | Aghion, P.; Howitt, P. |
| Abstract: | This comprehensive introduction to economic growth presents the main facts and puzzles about growth, proposes simple methods and models needed to explain these facts, acquaints the reader with the most recent theoretical and empirical developments, and provides tools with which to analyze policy design. The treatment of growth theory is fully accessible to students with a background no more advanced than elementary calculus and probability theory; the reader need not master all the subtleties of dynamic programming and stochastic processes to learn what is essential about such issues as cross-country convergence, the effects of financial development on growth, and the consequences of globalization. The book, which grew out of courses taught by the authors at Harvard and Brown universities, can be used both by advanced undergraduate and graduate students, and as a reference for professional economists in government or international financial organizations. |
| Date: | 2009–01 |
| URL: | http://d.repec.org/n?u=RePEc:ner:ucllon:http://eprints.ucl.ac.uk/17829/&r=dge |