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on Dynamic General Equilibrium |
| By: | Elena Afanasyeva; Jochen Guntner |
| Abstract: | This paper investigates the risk channel of monetary policy on the asset side of banks’ balance sheets. We use a factor-augmented vector autoregression (FAVAR) model to show that aggregate lending standards of U.S. banks, such as their collateral requirements for firms, are significantly loosened in response to an unexpected decrease in the Federal Funds rate. Motivated by this evidence, we reformulate the costly state verification (CSV) contract to allow for an active financial intermediary, embed the partial equilibrium contract in a New Keynesian DSGE model, and show that – consistent with our empirical findings – an expansionary monetary policy shock implies a temporary increase in bank lending relative to borrower collateral. In the model, this is accompanied by a higher default rate of borrowers. |
| JEL: | D53 E44 E52 |
| Date: | 2015–12–08 |
| URL: | http://d.repec.org/n?u=RePEc:hoo:wpaper:15115&r=dge |
| By: | Chen, Hung-Ju |
| Abstract: | This paper develops an overlapping generations model with endogenous retirement to examine the effect of fertility on long-run pay-as-you-go (PAYG) pensions. We find that pensions may not necessarily increase with the fertility rate. An increase in the fertility rate will raise pensions if the output elasticity of capital and the tax rate are sufficiently low, but such a change will reduce pensions if the fertility rate is sufficiently high. Our results also indicate that raising the fertility rate is more likely to reduce pensions in developing countries than in developed countries, while such a change tends to raise pensions for countries in which the costs of raising children are low. |
| Keywords: | Fertility; Retirement; OLG, PAYG pensions. |
| JEL: | H55 J13 J26 |
| Date: | 2015–11–23 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:68020&r=dge |
| By: | Su-Mei Chen; Ling-Yun He |
| Abstract: | Taking environmental tax rate as given, is there an optimal allocation of tax revenues to benefit economic variables? This paper analyzes this issue in an overlapping-generations model with the pollution-related health damage. It finds the optimal allocations towards pollution abatement and labor income to maximize the steady-state lifetime welfare and per-worker output, respectively. Moreover, a greater shift towards labor income might enhance steady-state welfare while reducing per-worker output. |
| Date: | 2015–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1512.01626&r=dge |
| By: | Giannone, Domenico (Federal Reserve Bank of New York); Monti, Francesca (Bank of England); Reichlin, Lucrezia (London Business School) |
| Abstract: | This paper develops a framework that allows us to combine the tools provided by structural models for economic interpretation and policy analysis with those of reduced-form models designed for nowcasting. We show how to map a quarterly dynamic stochastic general equilibrium (DSGE) model into a higher frequency (monthly) version that maintains the same economic restrictions. Moreover, we show how to augment the monthly DSGE with auxiliary data that can enhance the analysis and the predictive accuracy in now-casting and forecasting. Our empirical results show that both the monthly version of the DSGE and the auxiliary variables offer help in real time for identifying the drivers of the dynamics of the economy. |
| Keywords: | DSGE models; forecasting; temporal aggregation; mixed-frequency data; large data sets |
| JEL: | C33 C53 E30 |
| Date: | 2015–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsr:751&r=dge |
| By: | Kanat S. Isakov (National Research University Higher School of Economics); Sergey E. Pekarski (National Research University Higher School of Economics) |
| Abstract: | This paper uses a simple calibrated general equilibrium model to evaluate the revenue from financial repression and its impact on Laffer curves for consumption, capital and labor taxes. By imposing a requirement for households to hold public debt with a below-market rate of return the government distorts optimal household allocation and raises extra revenues. Tighter financial repression shifts Laffer curves for labor and consumption down, but increases revenue from capital income taxation. Total budget revenue increases, which allow financing more public goods and can be welfare-improving |
| Keywords: | financial repression; tax distortions; Laffer curve. |
| JEL: | E62 G28 H21 H24 H31 H63 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:hig:wpaper:113/ec/2015&r=dge |