nep-dge New Economics Papers
on Dynamic General Equilibrium
Issue of 2020‒02‒17
twenty papers chosen by
Christian Zimmermann
Federal Reserve Bank of St. Louis

  1. Monetary Policy and Wealth Effects By Nicolas Caramp; Dejanir H. Silva
  2. Business Cycle Fluctuations in Nigeria: Some Insights from an Estimated DSGE Model By Omotosho, Babatunde S.
  3. Rational Bubbles in Non-Linear Business Cycle Models: Closed and Open Economies By Kollmann, Robert
  4. Mismatch cycles By Isaac Baley; Ana Figueiredo; Robert Ulbricht
  5. Property Rights and Long-Run Capital By Julio Davila
  6. K-DSGE: A Dynamic Stochastic General Equilibrium Model for Saudi Arabia By Jorge Blazquez; Marzio Galeotti; Baltasar Manzano; Axel Pierru; Shreekar Pradhan
  7. Coexistence of Physical and Crypto Assets in a Stochastic Endogenous Growth Model By Alexis Derviz
  8. Shilnikov Chaos, Low Interest Rates, and New Keynesian Macroeconomics By Barnett, William; Bella, Giobanni; Ghosh, Taniya; Mattana, Paolo; Venturi, Beatrice
  9. Indeterminacy and imperfect information By Lubik, Thomas A.; Matthes, Christian; Mertens, Elmar
  10. Online Estimation of DSGE Models By Marco Del Negro; Frank Schorfheide; Michael Cai; Edward Herbst; Ethan Matlin; Reca Sarfati
  11. Policy Maker's Credibility with Predetermined Instruments for Forward-Looking Targets By Jean-Bernard Chatelain; Kirsten Ralf
  12. Job Duration and Match Characteristics over the Business Cycle By Ismail Baydur; Toshihiko Mukoyama
  13. Taking off into the Wind: Unemployment Risk and State-Dependent Government Spending Multipliers By Julien Albertini; Stéphane Auray; Hafedh Bouakez; Aurélien Eyquem
  14. Reducing the income tax burden for households with children: An assessment of the child tax credit reform in Austria By Christl, Michael; De Poli, Silvia; Varga, Janos
  15. Financial Market Incompleteness and International Cooperation on Capital Controls By Shigeto Kitano; Kenya Takaku
  16. Subjective Expectations, Social Security Benefits, and the Optimal Path to Retirement By María J. Prados; Arie Kapteyn
  17. The 2008 U.S. Auto Market Collapse By Bill Dupor; Rong Li; M. Saif Mehkari; Yi-Chan Tsai
  18. The Transmission of Monetary Policy under the Microscope By Martin Holm; Pascal Paul; Andreas Tischbirek
  19. Monetary Stimulus Policy in China: the Bank Credit Channel By Min Zhang; Yahong Zhang
  20. 非自発的失業の存在について:世代重複完全競争モデルを用いて By Tanaka, Yasuhito

  1. By: Nicolas Caramp; Dejanir H. Silva (Department of Economics, University of California Davis)
    Abstract: This paper studies the role of wealth effects in the monetary transmission mechanism in New Keynesian models. We propose a decomposition of consumption that extends the Slutsky equation to a general equilibrium setting. Wealth effects, and their amplification in general equilibrium, explain a large fraction of the consumption and inflation response to changes in nominal interest rates in the standard equilibrium. In RANK, wealth effects are determined, generically, by the revaluation of public debt and the fiscal response to monetary policy. In a medium-scale DSGE model, we find a fiscal response that is several times larger than the response we estimate in the data. Therefore, the model is unable to generate sufficiently strong effects. In an analytical HANK model with positive private debt, private wealth effects amplify the response to monetary policy and improve the quantitative performance of the DSGE model.
    Keywords: New Keynesian, Monetary Policy, Fiscal Policy, Wealth Effects
    JEL: E21 E52 E63
    Date: 2020–01–31
  2. By: Omotosho, Babatunde S.
    Abstract: This paper develops a two-agent New Keynesian model, which is suitable for identifying the drivers of business cycle fluctuations in small open, resource-rich, resource-dependent emerging economies. We confront the model with Nigerian data on eleven macro-economic variables using the Bayesian likelihood approach and show that output fluctuations are driven mainly by oil and monetary policy shocks in the short run and domestic supply shocks in the medium term. On the other hand, monetary and domestic supply shocks jointly account for around 70 per cent of short run variations in headline and core measures of inflation while oil shocks play a less prominent role owing partly to the low pass-through effect arising from the extant fuel subsidy regime in the country. Interrogating these findings further, we find that negative oil price shocks generate a persistent negative impact on output and a short-lived positive effect on headline inflation. In terms of policy responses, the estimated Taylor rule indicates a hawkish monetary policy stance over the sample period while the estimated fiscal rule provides evidence for a pro-cyclical and rather muted fiscal policy. Since domestic supply and oil-related shocks are key sources of macroeconomic fluctuations, the study calls for a more creative use of the country’s stabilisation funds as well as strategic fiscal interventions aimed at addressing the issues of domestic supply constraints and promoting private sector investments.
    Keywords: Business cycles, resource-rich economy, DSGE model
    JEL: E31 E32 E52 E58 F41 Q43
    Date: 2019–11
  3. By: Kollmann, Robert
    Abstract: This paper studies rational bubbles in non-linear dynamic general equilibrium models of the macroeconomy. The term ‘Rational bubble’ refers to multiple equilibria due to the absence of a transversality condition (TVC) for capital. The lack of TVC can be due to an OLG population structure. If a TVC is imposed, the macro models considered here have a unique solution. Bubbles reflect self-fulfilling fluctuations in agents’ expectations about future investment. In contrast to explosive rational bubbles in linearized models (Blanchard (1979)), the rational bubbles in non-linear models here are bounded. Bounded rational bubbles provide a novel perspective on the drivers and mechanisms of business cycles. I construct bubbles (in non-linear models) that feature recurrent boom-bust cycles characterized by persistent investment and output expansions which are followed by abrupt contractions in real activity. Both closed and open economies are analyzed. In a non-linear two-country model with integrated financial markets, bubbles must be perfectly correlated across countries. Global bubbles may, thus, help to explain the synchronization of international business cycles.
    Keywords: E1,E3,F3,F4, C6
    JEL: C6 E1 E3 F3 F4
    Date: 2020–01–29
  4. By: Isaac Baley; Ana Figueiredo; Robert Ulbricht
    Abstract: This paper studies the dynamics of skill mismatch over the business cycle. We build a tractable directed search model, in which workers differ in skills along multiple dimensions and sort into jobs with heterogeneous skill requirements along those dimensions. Skill mismatch arises due to information and labor market frictions. Estimated to the U.S., the model replicates salient business cyclic properties of mismatch. We show that job transitions in and out of bottom job rungs, combined with career mobility of workers, are important to account for the empirical behavior of mismatch. The predicted career dynamics provide a novel narrative for the scarring effect of unemployment. The model suggests significant welfare costs associated with mismatch due to learning frictions.
    Keywords: Business cycles, cleansing, learning about skills, multidimensional sorting, scarring effect of unemployment, search-and-matching, skill mismatch, sullying.
    JEL: E24 E32 J24 J64
    Date: 2020–01
  5. By: Julio Davila (Center for Operations Research and Econometrics CORE - UCL - Université Catholique de Louvain, CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)
    Abstract: The fact that some proprietary capital gradually falls into the public domain (e.g. patents) or is taxed to fund productive public spending (e.g. public infrastructures and the institutional framework) inefficiently decreases capital accumulation, impacting households' consumption. Specifically, for a neoclassical infinitely-lived agents economy with constant returns to scale the planner's steady state consumption is 4.6%-9.1% higher than the market one —for standard empirically supported parameters. For a similarly parametrised overlapping generations economy it is around 10.5%. A tax and subsidy balanced policy able to decentralise the planner's steady consists of (i) subsidising the rental rate of private capital by an amount equal to its depreciation by (ii) taxing households' net position between, on the one hand, firm and depreciated capital ownership and, on the other, borrowing against future dividends and its resale value. From standard functions and parameterisations of the OG setup it follows that the savings rate decentralising the planner's steady state is close to 61.5% —of which ⅓ in loans to firms and ⅔ in real monetary balances and assets ownership net of borrowing against the latter— and that the tax rate on household net debt is smaller the bigger are monetary real balances and debt.
    Keywords: Property rights,capital accumulation
    Date: 2019–05
  6. By: Jorge Blazquez; Marzio Galeotti; Baltasar Manzano; Axel Pierru; Shreekar Pradhan (King Abdullah Petroleum Studies and Research Center)
    Abstract: This paper describes a dynamic stochastic general equilibrium (DSGE) model of the Saudi Arabian economy, developed by KAPSARC researchers. The K-DSGE model is to be used for simulations and experiments to assess the impact of economic reforms within the Saudi Vision 2030 framework. The model will also complement the suite of models currently used at KAPSARC for macroeconomic analysis, to assess the impact of the Kingdom’s public policies.
    Keywords: Saudi Arabia, Economic Modeling, Saudi Vision 2030
    Date: 2019–06–01
  7. By: Alexis Derviz
    Abstract: We study a stochastic dynamic model with risky real investment and a positive long-term growth rate. With growing wealth, the economy gets clogged with increasing complexity costs (the classical "Leviathanian" inefficiencies in the form of implicit taxation and abuse of power, red tape, outlays on conflict resolution between special interest groups, etc.). To escape the Leviathan, agents can, in addition to the usual investment in physical capital, access the universe of crypto assets outside the reach of the mainstream state-supported economy. Crypto assets enjoy no legal protection, so converting them back into the real life consumption good is risky (due to digital criminality, hacking, regulatory crackdowns, etc.). A global ergodic solution is found for this model, demonstrating that crypto and conventional assets are capable of long-term coexistence, although the use of crypto assets, far from being universal, tends to be the choice of the wealthier part of the population.
    Keywords: Crypto assets, DSGE, ergodic distribution, full distribution solution, investment
    JEL: C61 C63 D58 E02 E26 G23
    Date: 2019–12
  8. By: Barnett, William; Bella, Giobanni; Ghosh, Taniya; Mattana, Paolo; Venturi, Beatrice
    Abstract: The paper shows that in a New Keynesian (NK) model, an active interest rate feedback monetary policy, when combined with a Ricardian passive fiscal policy, à la Leeper-Woodford, may induce the onset of a Shilnikov chaotic attractor in the region of the parameter space where uniqueness of the equilibrium prevails locally. Implications, ranging from long-term unpredictability to global indeterminacy, are discussed in the paper. We find that throughout the attractor, the economy lingers in particular regions, within which the emerging aperiodic dynamics tend to evolve for a long time around lower-than-targeted inflation and nominal interest rates. This can be interpreted as a liquidity trap phenomenon, produced by the existence of a chaotic attractor, and not by the influence of an unintended steady state or the Central Bank's intentional choice of a steady state nominal interest rate at its lower bound. In addition, our finding of Shilnikov chaos can provide an alternative explanation for the controversial “loanable funds” over-saving theory, which seeks to explain why interest rates and, to a lesser extent inflation rates, have declined to current low levels, such that the real rate of interest is below the marginal product of capital. Paradoxically, an active interest rate feedback policy can cause nominal interest rates, inflation rates, and real interest rates unintentionally to drift downwards within a Shilnikov attractor set. Policy options to eliminate or control the chaotic dynamics are developed.
    Keywords: Shilnikov chaos criterion, global indeterminacy, long-term un-predictability, liquidity trap
    JEL: C6 C61 C62 E12 E5 E52 E6 E63
    Date: 2020–01–30
  9. By: Lubik, Thomas A.; Matthes, Christian; Mertens, Elmar
    Abstract: We study equilibrium determination in an environment where two kinds of agents have different information sets: The fully informed agents know the structure of the model and observe histories of all exogenous and endogenous variables. The less informed agents observe only a strict subset of the full information set. All types of agents form expectations rationally, but agents with limited information need to solve a dynamic signal extraction problem to gather information about the variables they do not observe. In this environment, we identify a new channel that leads to equilibrium indeterminacy: Optimal information processing of the less informed agent introduces stable dynamics into the equation system that lead to self-fulling expectations. For parameter values that imply a unique equilibrium under full information, the limited information rational expectations equilibrium is indeterminate. We illustrate our framework with a monetary policy problem where an imperfectly informed central bank follows an interest rate rule.
    Keywords: limited information,rational expectations,signal extraction,belief shocks
    JEL: C11 C32 E52
    Date: 2020
  10. By: Marco Del Negro; Frank Schorfheide; Michael Cai; Edward Herbst (Board of Governors of the Federal Reserve System (U.S.); Institute for Empirical Macroeconomics; Tel Aviv University); Ethan Matlin; Reca Sarfati
    Abstract: The estimation of dynamic stochastic general equilibrium (DSGE) models is a computationally demanding task. As these models change to address new challenges (such as household and firm heterogeneity, the lower bound on nominal interest rates, and occasionally binding financial constraints), they become even more complex and difficult to estimate?so much so that current estimation procedures are no longer up to the task. This post discusses a new technique for estimating these models which belongs to the class of sequential Monte Carlo (SMC) algorithms, an approach we employ to estimate the New York Fed DSGE model. To learn more, check out this paper of ours.
    Keywords: Sequential Monte Carlo; DSGE models; Online
    JEL: E2
  11. 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, INSEEC - INSEEC Business School - Institut des hautes études économiques et commerciales Business School (INSEEC))
    Abstract: The aim of the present paper is to provide criteria for a central bank of how to choose among di¤erent monetary-policy rules when caring about a number of policy targets such as the output gap and expected in ‡ation. Special attention is given to the question if policy instruments are predetermined or only forward looking. Using the new-Keynesian Phillips curve with a cost-push-shock policy-transmission mechanism, the forward-looking case implies an extreme lack of robustness and of credibility of stabilization policy. The backward-looking case is such that the simple-rule parameters can be the solution of Ramsey optimal policy under limited commitment. As a consequence, we suggest to model explicitly the rational behavior of the policy maker with Ramsey optimal policy, rather than to use simple rules with an ambiguous assumption leading to policy advice that is neither robust nor credible.
    Keywords: Determinacy,Proportional Feedback Rules,Dynamic Stochastic General Equilibrium,Ramsey Optimal Policy under Quasi-Commitment Keywords: Determinacy,Ramsey Optimal Policy under Quasi-Commitment
    Date: 2019–11
  12. By: Ismail Baydur (School of Economics, Singapore Management University); Toshihiko Mukoyama (Department of Economics, Georgetown University)
    Abstract: This paper studies the cyclical behavior of job separation and the characteristics of matches between workers and jobs. We estimate a proportional hazard model with competing risks, distinguishing between different types of separations. A higher unemployment rate at the start of an employment relationship increases the probability of job-to-job transitions, whereas its effect on employment-to-unemployment transitions is negative. We then build a simple job-ladder model to interpret our empirical results. A model with two-dimensional heterogeneity in match (job) characteristics has the same qualitative features as the data. Once the model is calibrated to include cyclicality in the offered match characteristics, it can fit the quantitative features of the data.
    Keywords: business cycles, match characteristics, job duration, unemployment, job-to-job transitions
    JEL: E24 E32 J22 J63 J64
    Date: 2020–01–24
  13. By: Julien Albertini (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet [Saint-Étienne] - Université de Lyon - CNRS - Centre National de la Recherche Scientifique); Stéphane Auray (CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - X - École polytechnique - ENSAE ParisTech - École Nationale de la Statistique et de l'Administration Économique - CNRS - Centre National de la Recherche Scientifique, ULCO - Université du Littoral Côte d'Opale); Hafedh Bouakez (HEC Montréal - HEC Montréal, CIREQ - Centre interuniversitaire de recherche en économie quantitative); Aurélien Eyquem (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet [Saint-Étienne] - Université de Lyon - CNRS - Centre National de la Recherche Scientifique)
    Abstract: We propose a model with involuntary unemployment, incomplete markets, and nominal rigidity, in which the effects of government spending are state-dependent. An increase in government purchases raises aggregate demand, tightens the labor market and reduces unemployment. This in turn lowers unemployment risk and thus precautionary saving, leading to a larger response of private consumption than in a model with perfect insurance. The output multiplier is further amplified through a composition effect, as the fraction of high-consumption households in total population increases in response to the spending shock. These features, along with the matching frictions in the labor market, generate significantly larger multipliers in recessions than in expansions. As the pool of job seekers is larger during downturns than during expansions, the concavity of the job-finding probability with respect to market tightness implies that an increase in government spending reduces unemployment risk more in the former case than in the latter, giving rise to countercyclical multipliers.
    Keywords: Government spending,Multipliers,Precautionary saving,State dependence,Unemployment risk
    Date: 2020
  14. By: Christl, Michael; De Poli, Silvia; Varga, Janos
    Abstract: This paper analyses the impact of the implementation of a child tax credit in Austria in 2019, not only on micro, but also on macro level by using a dynamic scoring methodology. First, we assess the fiscal and distributional impact of this reform using the microsimulation model EUROMOD. Second, we estimate labour supply impacts of the reform based on a structural discrete choice framework. Third, we evaluate the macroeconomic impacts of the reform, by calibrating and shocking QUEST, the DSGE model of the European Commission, with the micro-based results for the implicit tax rate, the non-participation and the labour supply elasticities. We show that the child tax credit reform in Austria reduces inequality, lowers the poverty rate in general, but by definition only for households with children. Overall the reform has a positive impact on labour supply, both on the extensive and on the intensive margin, especially for women. On the macro-level (and in the long-run), our model suggests a positive impact on employment. Additionally, we find that parts of the tax decrease can be potentially captured by the employer, meaning that gross wages would fall slightly. However, we find small but positive effects on GDP, investment and consumption, although the longrun macroeconomic effects depend crucially on how the government compensates the missing tax revenues after the reform. Accounting for these feedback effects at the micro level with a new methodology, we show that the second round effects are important to take into account, because they provide insights into the medium-term distributional impact of the reform.
    Keywords: EUROMOD,tax credit,reform,DSGE,labour supply,microsimulation,discrete choice
    JEL: H24 H31 I38
    Date: 2020
  15. By: Shigeto Kitano (Research Institute for Economics and Business Administration, Kobe University, Japan); Kenya Takaku (Faculty of International Studies, Hiroshima City University, Japan)
    Abstract: We examine how the degree of financial market incompleteness affects welfare gains from international cooperation on capital controls. When financial markets are incomplete, international risk sharing is disturbed. However, the optimal global policy significantly reverses the welfare deterioration due to inefficient risk-sharing. We show that when financial markets are more incomplete, the welfare gap between the optimal global policy and the Nash equilibrium increases, and the welfare gains from international cooperation on capital controls then become larger.
    Keywords: Financial markets; Incomplete markets; Policy cooperation; Capital controls; Optimal policy; Welfare; Ramsey policy; Open-loop Nash game
    JEL: D52 E61 F32 F38 F42 G15
    Date: 2020–01
  16. By: María J. Prados (University of Southern California); Arie Kapteyn (University of Southern California)
    Abstract: Americans face the challenges of retirement with varying degrees of preparation. Evidence indicates that that many individuals may not be making the best possible choices with respect to their Social Security and retirement savings. We assess the subjective expectations of non-retirees and find that they have sizable biases and uncertainty about future retirement benefits. This uncertainty and the level of subjective expectations can affect workers’ wealth accumulation and retirement readiness. We build on these observations and combine unique survey data with a life-cycle optimization model to measure the role of Social Security literacy, subjective expectations about retirement benefits, and behavioral traits as determinants of life-cycle savings decisions and welfare. The goal of this project is to better understand the role of retirement expectations as determinants of savings decisions and retirement income. We forecast future benefits and measure the bias in expectations. We find heterogeneity in the direction of the expectation bias: Men and those with low levels of uncertainty about retirement benefits are less likely to overestimate their future retirement benefits, hence are more likely to save more and reach retirement better prepared. We find that these biases in subjective expectations translate into suboptimal asset accumulation and welfare losses.
    Date: 2019–11
  17. By: Bill Dupor (Federal Reserve Bank of St Louis); Rong Li; M. Saif Mehkari; Yi-Chan Tsai
    Abstract: New vehicle sales in the U.S. fell nearly 40 percent during the past recession, causing significant job losses and unprecedented government interventions in the auto industry. This paper explores three potential explanations for this decline: increasing oil prices, falling home values, and falling household income expectations. First, we use the historical macroeconomic relationship between oil prices and vehicle sales to show that the oil price spike explains roughly 15 percent of the auto sales decline between 2007 and 2009. Second, we establish that declining home values explain only a small portion of the observed reduction in household new vehicle sales. Using a county-level panel from the episode, we find (1) a one-dollar fall in home values reduced household new vehicle spending by 0.5 to 0.7 cents and overall new vehicle spending by 0.9 to 1.2 cents and (2) falling home values explain between 16 and 19 percent of the overall new vehicle spending decline. Next, examining state-level data for 1997-2016, we find (3) the short-run responses of new vehicle consumption to home value changes are larger in the 2005-2011 period relative to other years, but at longer horizons (e.g. 5 years), the responses are similar across the two sub-periods and (4) the service flow from vehicles, as measured by miles traveled, responds very little to house price shocks. We also detail the sources of the differences between our findings (1) and (2) from existing research. Third, we establish that declining current and expected future income expectations potentially played an important role in the auto market's collapse. We build a permanent income model augmented to include infrequent repeated car buying. Our calibrated model matches the pre-recession distribution of auto vintages and the liquid-wealth-to-income ratio, and exhibits a large vehicle sales decline in response to a mild decline in expected permanent income due to a transitory slowdown in income growth. In response to the shock, households delay replacing existing vehicles, allowing them to smooth the effects of the income shock without significantly adjusting the service flow from their vehicles. Augmenting our model with a richer set of household expectations allows us to match 65 percent of the overall new vehicle spending decline (i.e. roughly the portion of the decline not explained by oil prices and falling home values). Combining our negative results regarding housing wealth and oil prices with our positive model-based findings, we interpret the auto market collapse as consistent with existing permanent income based approaches to durable goods purchases (e.g., Leahy and Zeira (2005)).
    Keywords: new auto sales; 2007-2009 recession
    JEL: E27 E32
    Date: 2020–01–31
  18. By: Martin Holm (University of Oslo); Pascal Paul; Andreas Tischbirek (HEC Lausanne, University of Lausanne)
    Abstract: We investigate the transmission of monetary policy to household consumption using detailed administrative data on the universe of households in Norway. Based on a novel series of identified monetary policy shocks, we estimate the dynamic responses of consumption, income, and saving along the liquid asset distribution of households. We find that low-liquidity but also high-liquidity households show strong responses, interest rate changes faced by borrowers and savers feed into consumption, and indirect effects of monetary policy outweigh direct effects, albeit with a delay. Overall, the results support the importance of financial frictions, cash-flow channels, and heterogeneous effects of monetary policy.
    Keywords: Monetary policy; Household balance sheets; Liquidity constraints; Heterogeneous agent New Keynesian models
    JEL: D31 E12 E21 E24 E32 E43 E52
    Date: 2020–01–31
  19. By: Min Zhang (East China Normal University, Faculty of Economics and Management, School of Economics); Yahong Zhang (Department of Economics, University of Windsor)
    Abstract: This paper develops a novel while plausible way to model the Chinese monetary transmission via open market operations (OMOs). In the model, monetary injections through OMOs, together with differentiated collateral regulation in the banking sector, directly affect banks' loan capacities, which then influences sectoral investments and aggregate GDP. The quantitative analysis shows that the 2009--2010 monetary expansion explains nearly 90 percent of the rise in GDP growth. Moreover, balancing credit allocation across sectors and applying unified banking regulations jointly enhance the GDP growth rate by 2.15 percentage points, with the contribution of the unified banking regulations proving more important.
    Keywords: Monetary stimulus, Bank credit channel, Open market operation rule, Chinese economy
    JEL: E32 E44 E52
    Date: 2020–02
  20. By: Tanaka, Yasuhito
    Abstract: We show the existence of involuntary unemployment without assuming wage rigidity. We derive involuntary unemployment by considering utility maximization of consumers and profit maximization of firms in an overlapping generations model under perfect competition with decreasing or constant returns to scale technology. We show that there exists involuntary unemployment even when labor supply is divisible. We consider homothetic utility functions of consumers including log-linear function.
    Keywords: involuntary unemployment, perfect competition, divisible labor supply
    JEL: E12 E24
    Date: 2020–01–31

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