|
on Dynamic General Equilibrium |
| By: | Parantap Basu (Professor, Durham University Business School, Durham University (E-mail: parantap.basu@durham.ac.uk.)); Kenji Wada (Professor, Faculty of Business and Commerce, Keio University (E-mail: kwada@fbc.keio.ac.jp)) |
| Abstract: | In this paper, we set up a medium scale new-Keynesian dynamic stochastic general equilibrium (DSGE) model to analyze the effects of various phases of unconventional monetary policy (UMP) on the Japanese bond market. Our model has two novel features: (i) a banking friction in the form of an aggregate bank run risk to motivate commercial banks' demand for excess reserve, and (ii) dynamic linkage between Central Bank resource constraint and the government budget constraint via a transfer payment by the Central Bank to the Treasury. We do three policy simulations to analyze the effects of various phases of UMP shocks on the bond market, namely: (i) effect of a quantitative easing (QE) shock; (ii) the effect of a negative shock to the overnight borrowing rate; and (iii) the effect of a negative shock to the interest rate on banks' excess reserve (IOER). In light of these results, we do an evaluation of the recent yield curve control policy of the Bank of Japan. |
| Keywords: | QE, QQE, Excess Reserve, Overnight Borrowing Rate, IOER, Yield Curve Control |
| JEL: | E43 E44 E58 |
| Date: | 2018–08 |
| URL: | http://d.repec.org/n?u=RePEc:ime:imedps:18-e-12&r=all |
| By: | Jean-Olivier Hairault (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); François Langot (GAINS - Groupe d'Analyse des Itinéraires et des Niveaux Salariaux - UM - Le Mans Université, TEPP - Travail, Emploi et Politiques Publiques - CNRS - Centre National de la Recherche Scientifique - UPEM - Université Paris-Est Marne-la-Vallée); Thepthida Sopraseuth (CEPREMAP - Centre pour la recherche économique et ses applications) |
| Abstract: | In this paper, we show that (i) the volatility of worker flows increases with age in US CPS data, and (ii) a search and matching model with life-cycle features, endogenous separation and search effort, is well suited to explain this fact. With a shorter horizon on the labor market, older workers' outside options become less responsive to new employment opportunities, thereby making their wages less sensitive to the business cycle. Their job finding and separation rates are then more volatile along the business cycle. The horizon effect cannot explain the significant differences between prime-age and young workers as both age groups are far away from retirement. A lower bargaining power on the youth labor market brings the model closer to the data. JEL Classification: E32, J11, J23 |
| Keywords: | search,matching,business cycle,life cycle |
| Date: | 2019–01–17 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-01984987&r=all |
| By: | Aquino, Juan Carlos (Banco Central de Reserva del Perú) |
| Abstract: | A common problem in international finance consists of the indeterminacy of the equilibrium asset portfolio in small open economy models. This paper develops a simple approach to compute this portfolio under the assumption of incomplete financial markets. The procedure involves the limiting allocation of a class of two-country world economies where the relative size of one of them tends to zero. Such approach allows to identify the effect of portfolio decisions on the dynamics of the net foreign asset position of a small open economy in a structural fashion. As an illustration, an approximated closed-form solution is obtained for a highly stylized model that is isomorphic to the class of Dynamic Stochastic General Equilibrium (DSGE) models typically used in the literature. JEL Classification: F32. Keywords: net foreign assets, endogenous portfolios, small open economies, DSGE models. |
| Keywords: | net foreign assets, endogenous portfolios, small open economies, DSGE models |
| JEL: | F32 |
| Date: | 2018–12 |
| URL: | http://d.repec.org/n?u=RePEc:rbp:wpaper:2018-011&r=all |
| By: | Ansgar Rannenberg (National Bank of Belgium) |
| Abstract: | I develop a New Keynesian model with preferences over safe assets (POSA) calibrated using evidence on the wedge between household discount rates and market interest rates. POSA attenuate intertemporal consumption smoothing and thus the household’s responsiveness to future interest rates, the more so the more distant in time they are located, and imply a consumption wealth effect. Therefore, POSA substantially lower the macroeconomic effect of forward guidance policies. By contrast, POSA does not substantially change the effect of the standard shocks of Smets/Wouters (2007) type DSGE models. The results carry over to a model with Iacoviello (2005,2014)-type collateral constraints. Such constraints in themselves tend to strongly amplify the effect of forward guidance. |
| Keywords: | Forward guidance puzzle, preferences over safe assets, monetary policy, collateral constraints |
| JEL: | E52 E62 E32 |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbb:reswpp:201901-364&r=all |
| By: | Bobba, Matteo; Flabbi, Luca; Levy, Santiago; Tejada, Mauricio |
| Abstract: | We develop a search and matching model where firms and workers produce output that depends both on match-specific productivity and on worker-specific human capital. The human capital is accumulated while working but depreciates while searching for a job. Jobs can be formal or informal and firms post the formality status. The equilibrium is characterized by an endogenous steady state distribution of human capital and by an endogenous formality rate. The model is estimated on longitudinal labor market data for Mexico. Human capital accumulation on-the-job is responsible for more than half of the overall value of production and upgrades more quickly while working formally than informally. Policy experiments reveal that the dynamics of human capital accumulation magnifies the negative impact on productivity of the labor market institutions that give raise to informality. |
| Keywords: | Labor market frictions; Search and matching; Nash bargaining; Informality; On-the-Job human capital accumulation |
| JEL: | J24 J3 J64 O17 |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:33230&r=all |
| By: | Oliver de Groot (University of St Andrews) |
| Abstract: | This paper studies the effect of liquidity crises in short-term debt markets in a dynamic general equilibrium framework. Creditors (retail banks) receive imperfect signals regarding the profitability of borrowers (wholesale banks) and, based on these signals and their beliefs about other creditors actions, choose whether to rollover funding, or not. The uncoordinated actions of creditors cause a suboptimal incidence of rollover, generating an illiquidity premium. Leverage magnifies the coordination inefficiency. Illiquidity shocks in credit markets result in sharp contractions in output. Policy responses are analyzed. |
| Keywords: | Financial frictions, DSGE models, Global games, Bank runs, Unconventional monetary policy, Financial crises |
| JEL: | D82 E32 E44 G12 |
| Date: | 2019–01–31 |
| URL: | http://d.repec.org/n?u=RePEc:san:wpecon:1902&r=all |
| By: | Finn Kydland; Nick Pretnar |
| Abstract: | Throughout the 21st century, population aging in the United States will lead to increases in the number of elderly people requiring some form of living assistance which, as some argue, is to be seen as a burden on society, straining old-age insurance systems and requiring younger agents to devote an increasing fraction of their time toward caring for infirm elders. Given this concern, it is natural to ask how aggregate GDP growth is affected by such a phenomenon. We develop an overlapping generations model where young agents face idiosyncratic risk of contracting an old-age disease, like for example Alzheimer's or dementia, which adversely affects their ability to fully enjoy consumption. Young agents care about their infirm elders and can choose to supplement elder welfare by spending time taking care of them. Through this channel, aggregate GDP growth endogenously depends on young agents' degree of altruism. We calibrate the model and show that projected population aging will lead to future reductions in output of 17% by 2056 and 39% by 2096 relative to an economy with a constant population distribution. Curing diseases like Alzheimer's and dementia can lead to a compounded output increase of 5.4% while improving welfare for all agents. |
| JEL: | J14 J22 O40 |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:25498&r=all |
| By: | Brinca, Pedro; Duarte, João B.; Holter, Hans A.; Oliveira, João G. |
| Abstract: | Since 1980 the U.S. economy has experienced a large increase in income inequality. To explain this phenomenon we develop a life-cycle, overlapping generations model with uninsurable labor market risk, a detailed tax system and investment-specific technological change (ISTC). We calibrate our model to match key characteristics of the U.S. economy and study how ISTC, shifts in taxation, government debt and employment have contributed to the rise in income inequality. We find that these structural changes can account for close to one third of the observed increase in the post-tax income Gini. The main mechanisms in play are the rise in the wage premium of non-routine workers, resulting from capital-non-routine complementarity, as well as a reduction of the progressivity of the labor income tax schedule, which increases post-tax inequality. We show that ISTC alone accounts for roughly 15% of the change observed in post-tax income Gini, while the reduction in progressivity accounts for 16%. |
| Keywords: | Income Inequality, Taxation, Automation |
| JEL: | E21 H21 J31 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:91960&r=all |
| By: | Robert Calvert Jump (University of the West of England); Paul Levine (University of Surrey and CIMS) |
| Abstract: | This paper provides a bird's eye view of the behavioural New Keynesian literature. We discuss three key empirical regularities in macroeconomic data which are not ac- counted for by the standard New Keynesian model, namely, excess kurtosis, stochastic volatility, and departures from rational expectations. We then present a simple be- havioural New Keynesian model that accounts for these empirical regularities in a straightforward manner. We discuss elaborations and extensions of the basic model, and suggest areas for future research. |
| JEL: | E30 E32 |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:sur:surrec:0219&r=all |
| By: | Francisco (F.) Blasques (VU Amsterdam, The Netherlands); Marc Nientker (VU Amsterdam, The Netherlands) |
| Abstract: | This paper introduces a new solution method for Dynamic Stochastic General Equilibrium (DSGE) models that produces non explosive paths. The proposed solution method is as fast as standard perturbation methods and can be easily implemented in existing software packages like Dynare as it is obtained directly as a transformation of existing perturbation solutions proposed by Judd and Guu (1997) and Schmitt-Grohe and Uribe (2004), among others. The transformed perturbation method shares the same advantageous function approximation properties as standard higher order perturbation methods and, in contrast to those methods, generates stable sample paths that are stationary, geometrically ergodic and absolutely regular. Additionally, moments are shown to be bounded. The method is an alternative to the pruning method as proposed in Kim et al. (2008). The advantages of our approach are that, unlike pruning, it does not need to sacrifice accuracy around the steady state by ignoring higher order effects and it delivers a policy function. Moreover, the newly proposed solution is always more accurate globally than standard perturbation methods. We demonstrate the superior accuracy of our method in a range of examples. |
| Keywords: | Higher-order perturbation approximation; non-explosive simulations; stochastic stability |
| JEL: | C15 C63 E00 |
| Date: | 2019–02–05 |
| URL: | http://d.repec.org/n?u=RePEc:tin:wpaper:20190012&r=all |
| By: | Jean-Bernard Chatelain (PSE - Paris School of Economics, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique); Kirsten Ralf (ESCE – International Business School) |
| Abstract: | The determinacy of dynamic stochastic general equilibrium models including fiscal, macro-prudential or Taylor rules relies on the assumption that policy instruments are forward-looking when policy targets are also forward-looking. Blanchard and Kahn (1980) determinacy condition does not forbid to assume that policy instruments are backward-looking when policy targets are forward-looking, as it is the case for Ramsey optimal policy under quasi-commitment. There is indeterminacy of determinacy unless six criteria are considered which are in favor of assuming that policy instruments are backward-looking when policy targets are forward-looking. |
| Keywords: | Determinacy,Proportional Feedback rules,Dynamic Stochastic General Equilibrium,Taylor rule,Fiscal rule,Macro-prudential rule,optimal control,Ramsey optimal policy under quasi-commitment |
| Date: | 2018–09 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-01877766&r=all |
| By: | Aleksandar Vasilev (Lincoln International Business School, UK) |
| Abstract: | We introduce "fair" wages in a general-equilibrium model where worker's effort is unobservable and investigate whether such a mechanism can quantitatively account for the degree of real wage rigidity in the Bulgarian labor markets, as documented in Lozev, Vladova, and Paskaleva (2011) and Paskaleva (2016). In contrast to Danthine and Kurmann (2004), here we internalize the effect that past wages have on current effort level. We calibrate the model to Bulgarian data (1999-2016), and quantify the effect of technological shocks on hours and wages in the theoretical setup. Overall, the calibrated model with "fair" wages performs poorly when it comes to the relative volatilities of labor market variables. This is because aggregate labor market conditions, as proxied by the employment rate and past aggregate wages, turn out not to be quantitatively important for business cycles in Bulgaria. |
| Keywords: | Business cycles, Unobservable effort, Fair wages, unemployment, Bulgaria |
| JEL: | E24 E32 J41 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:sko:wpaper:bep-2019-03&r=all |
| By: | Shen, Ji (Peking University); Wei, Bin (Federal Reserve Bank of Atlanta); Yan, Hongjun (DePaul University) |
| Abstract: | This paper analyzes financial intermediation chains in a search model with an endogenous intermediary sector. We show that the chain length and price dispersion among interdealer trades are decreasing in search cost, search speed, and market size but increasing in investors' trading needs. Using data from the U.S. corporate bond market, we find evidence broadly consistent with these predictions. Moreover, as search speed approaches infinity, the search equilibrium does not always converge to the centralized-market equilibrium: prices and allocation converge, but the trading volume might not. Finally, we analyze the multiplicity and stability of the equilibrium. |
| Keywords: | search; chain; financial intermediation; multiplicity; stability |
| JEL: | G10 |
| Date: | 2018–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedawp:2018-15&r=all |
| By: | Holden, Tom D.; Levine, Paul; Swarbrick, Jonathan M. |
| Abstract: | We present a model in which banks and other financial intermediaries face both occasionally binding borrowing constraints, and costs of equity issuance. Near the steady state, these intermediaries can raise equity finance at no cost through retained earnings. However, even moderately large shocks cause their borrowing constraints to bind, leading to contractions in credit offered to firms, and requiring the intermediaries to raise further funds by paying the cost to issue equity. This leads to the occasional sharp increases in interest spreads and the counter-cyclical, positively skewed equity issuance that are characteristic of the credit crunches observed in the data. |
| Keywords: | Occasionally binding constraints,Credit crunches,Financial crises,Spreads,Dividends,Equity,Banking |
| JEL: | E22 E32 E51 G2 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bubdps:572018&r=all |
| By: | Hippolyte D'Albis (PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics); Angela Greulich (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, INED - Institut national d'études démographiques); Grégory Ponthière (PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, ERUDITE - Equipe de Recherche sur l’Utilisation des Données Individuelles en lien avec la Théorie Economique - UPEM - Université Paris-Est Marne-la-Vallée - UPEC UP12 - Université Paris-Est Créteil Val-de-Marne - Paris 12) |
| Abstract: | During the last century, fertility has exhibited, in industrialized economies, two distinct trends: the cohort total fertility rate follows a decreasing pattern, while the cohort average age at motherhood exhibits a U-shaped pattern. This paper proposes a Unified Growth Theory aimed at rationalizing those two demographic stylized facts. We develop a three-period OLG model with two periods of fertility, and show how a traditional economy, where individuals do not invest in education, and where income rises push towards advancing births, can progressively converge towards a modern economy, where individuals invest in education, and where income rises encourage postponing births. Our findings are illustrated numerically by replicating the dynamics of the quantum and the tempo of births for cohorts 1906-1975 of the Human Fertility Database. |
| Keywords: | regime shift,fertility,childbearing age,births postponement,human capital |
| Date: | 2018–07 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-01848098&r=all |
| By: | Jean-Bernard Chatelain (PSE - Paris School of Economics, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique); Kirsten Ralf (ESCE – International Business School) |
| Abstract: | Giannoni and Woodford (2003) found that the equilibrium determined by com- mitment to a super-inertial rule (where the sum of the parameters of lags of interest rate exceed ones and does not depend on the auto-correlation of shocks) corresponds to the unique bounded solution of Ramsey optimal policy for the new-Keynesian model. By contrast, this note demonstrates that commitment to an inertial rule (where the sum of the parameters of lags of interest rate is below one and depends on the auto-correlation of shocks) corresponds to the unique bounded solution. |
| Keywords: | Ramsey optimal policy,Interest rate smoothing,Super-inertial rule,Inertial rule,New-Keynesian model |
| Date: | 2018–08 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-01863367&r=all |
| By: | Paul Levine (University of Surrey and CIMS) |
| Abstract: | This survey and assessment of the state of DSGE modelling is structured around six key criticisms levelled at the approach. The first is fundamental and common to macroeconomics and microeconomics alike - namely, problems with rationality and expected utility maximization. The second is that DSGE models examine fluctuations about an exogenous balanced growth path and there is no role for endogenous growth, either medium or long-term. The third consists of a number of concerns associated with systems estimation. The fourth is another fundamental problem with any microfounded macro-model - that of heterogeneity and aggregation. The fifth and sixth concerns focus on the rudimentary nature of earlier models that lacked unemployment and a banking sector. |
| JEL: | C11 C18 C32 E32 E47 E52 E62 O44 |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:sur:surrec:0319&r=all |
| By: | Choi, Jason (University of Wisconsin-Madison); Foerster, Andrew (Federal Reserve Bank of San Francisco) |
| Abstract: | An economy that switches between high and low growth regimes creates incentives for the monetary authority to change its rule. As lower growth tends to produce lower real interest rates, the monetary authority has an incentive to increase the inflation target and increase the degree of inertia in setting rates in an attempt to keep the nominal rate positive. An optimizing monetary authority therefore responds to permanently lower growth by slightly increasing both the inflation target and inertia; focusing solely on the inflation target ignores a key margin of adjustment. With repeated growth rate regime switches, an optimal monetary rule that switches at the same time internalizes both the direct effects of growth regime change and the indirect expectation effects generated by switching in policy. The switching rule improves economic outcomes relative to a constant rule and one that does not consider the impact of regime changes; this result is robust to the case when the monetary authority misidentifies the growth regime with relatively high frequency. |
| JEL: | C63 E31 E52 |
| Date: | 2019–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedfwp:2019-03&r=all |
| By: | Benjamin Carton; Emilio Fernández Corugedo; Benjamin L Hunt |
| Abstract: | This paper uses a multi-region, forward-looking, DSGE model to estimate the macroeconomic impact of a tax reform that replaces a corporate income tax (CIT) with a destination-based cash-flow tax (DBCFT). Two key channels are at play. The first channel is the shift from an income tax to a cash-flow tax. This channel induces the corporate sector to invest more, boosting long-run potential output, GDP and consumption, but crowding out consumption in the short run as households save to build up the capital stock. The second channel is the shift from a taxable base that comprises domestic and foreign revenues, to one where only domestic revenues enter. This leads to an appreciation of the currency to offset the competitiveness boost afforded by the tax and maintain domestic investment-saving equilibrium. The paper demonstrates that spillover effects from the tax reform are positive in the long run as other countries’ exports benefit from additional investment in the country undertaking the reform and other countries’ domestic demand benefits from improved terms of trade. The paper also shows that there are substantial benefits when all countries undertake the reform. Finally, the paper demonstrates that in the presence of financial frictions, corporate debt declines under the tax reform as firms are no longer able to deduct interest expenses from their profits. In this case, the tax shifting results in an increase in the corporate risk premia, a near-term decline in output, and a smaller long-run increase in GDP. |
| Date: | 2019–01–16 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:19/13&r=all |
| By: | Hippolyte D'Albis (PSE - Paris School of Economics, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique); Ekrame Boubtane (CERDI - Centre d'Études et de Recherches sur le Développement International - UdA - Université d'Auvergne - Clermont-Ferrand I - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique); Dramane Coulibaly (EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | This paper shows that the macroeconomic and fiscal consequences of international migration are positive for OECD countries, and suggests that international migration produces a demographic dividend by increasing the share of the work- force within the population. The estimation of a structural vector autoregressive model on a panel of 19 OECD countries over the period 1980-2015 reveals that a migration shock increases GDP per capita through a positive effect on both the ratio of working-age to total population and the employment rate. International migration also improves the fiscal balance by reducing the per capita transfers paid by the government and per capita old-age public spending. To rationalize these findings, an original theoretical framework is developed. This framework highlights the roles of both the demographic structure and intergenerational public transfers and shows that migration is beneficial to host economies characterized by aging populations and large public sectors. |
| Keywords: | Immigration,public finances,overlapping-generation model,panel VAR |
| Date: | 2018–12–14 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-01955539&r=all |
| By: | Michel de Vroey (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES)) |
| Abstract: | According to Leijonhufvud, the development of economic theory can be compared to a decision tree, the branches of which originate in choices made about basic methodological nodes. My paper is an attempt at putting this insight into practice by reconstructing the recent history of macroeconomics on its basis. To this end, I examine whether the decision-tree framework can explain three crucial turns in the history of the field: (a) the transition from Keynesian to new classical macroeconomics triggered by Lucas; (b) the transition from the Lucas model to Kydland and Prescott’s ‘real business cycle’ modeling strategy; and (c) the transition from RBC modeling to DSGE modeling. |
| Keywords: | Marshall, Walras, Keynes, Lucas, RBC model, New Keynesian model |
| JEL: | B22 E12 E E30 |
| Date: | 2018–11 |
| URL: | http://d.repec.org/n?u=RePEc:ctl:louvir:2018018&r=all |
| By: | Riccardo Magnani (CEPN - Centre d'Economie de l'Université Paris Nord - UP13 - Université Paris 13 - USPC - Université Sorbonne Paris Cité - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | In order to face the population ageing problem, most countries with PAYG systems introduced pension reforms during the last twenty years. However, in many cases these reforms are considered as insufficient to guarantee the pension sustainability; in other cases, the pension sustainability is achieved through the introduction of drastic reforms and, thus, at the expense of a dramatic reduction in the well-being of current and future generations. The objective of this article is to show that the non-sustainability of PAYG systems and, consequently, the necessity to introduce drastic pension reforms, is explained by the fact that in countries with PAYG systems pensions have not been computed according to appropriate rules. In particular, we show that the sustainability of the pension system is guaranteed if (i) pension benefits are computed using actuarial principles, (ii) the implicit rate of return on contributions is the same for each retiree and equal to the average wage bill growth rate, and (iii) pension reserves are remunerated at a risk-free interest rate equal to the average wage bill growth rate. These conditions allow a PAYG system to face any demographic shock, such as an increase in life expectancy and a transitory increase in fertility rates (baby boom) followed by a transitory reduction in fertility rates (baby boost). |
| Keywords: | Pension economics,Pension finance,Population ageing |
| Date: | 2018–12–28 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-01966571&r=all |
| By: | Hippolyte D'Albis (PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics); Ekrame Boubtane (CERDI - Centre d'Études et de Recherches sur le Développement International - Clermont Auvergne - UCA - Université Clermont Auvergne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique); Dramane Coulibaly (EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | This paper evaluates the fiscal effect of international migration. It first estimates a structural Vector Autoregressive model on a panel of 19 OECD countries over the period 1980-2015, in order to quantify the impact of a migration shock. Empirical results suggest that international migration had a positive impact on the economic and fiscal performance of OECD countries. It then proposes an original theoretical framework that highlights the importance of both the demographic structure and the intergenerational public transfers. Hence, OECD countries seems to have benefited from a \demographic dividend" of international migration since 1980. |
| Keywords: | Immigration,public spending,overlapping-generation model,panel VAR |
| Date: | 2018–08 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-01852411&r=all |
| By: | Jean-Bernard Chatelain (PSE - Paris School of Economics, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique); Kirsten Ralf (Ecole Supérieure du Commerce Extérieur - ESCE - International business school) |
| Abstract: | When the probability of not reneging commitment of optimal monetary policy under quasi-commitment tends to zero, the limit of this equilibrium is qualitatively and quantitatively different from the discretion equilibrium assuming a zero probability of not reneging commitment for the classic example of the new-Keynesian Phillips curve. The impulse response functions and welfare are different. The policy rule parameter have opposite signs. The inflation auto-correlation parameter crosses a saddlenode bifurcation when shit.ng to near-zero to zero probability of not reneging commitment. These results are obtained for all values of the elasticity of substitution between goods in monopolistic competition which enters in the welfare loss function and in the slope of the new-Keynesian Phillips curve. |
| Keywords: | Ramsey optimal policy under imperfact commitment,zero-credibility policy,Impulse response function,Welfare,New-Keynesian Phillips curve, zero-,credibility policy, Impulse response function, Welfare, New-Keynesian Phillips,curve |
| Date: | 2018–07 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-01849864&r=all |