nep-dge New Economics Papers
on Dynamic General Equilibrium
Issue of 2021‒04‒19
24 papers chosen by
Christian Zimmermann
Federal Reserve Bank of St. Louis

  1. A medium-scale Bayesian DSGE model for Kazakhstan with incomplete exchange rate pass through By Nurdaulet Abilov
  2. Structural Reforms in DSGE Model By Vahagn Davtyan; Haykaz Igityan
  3. MEDSEA-FIN A DSGE model of the Maltese economy with housing and financial frictions By William Gatt; Noel Rapa; Luca Brugnolini
  4. Monetary policy rules and the effective lower bound in the Euro area By Haavio, Markus; Laine, Olli-Matti
  5. Asymmetric Effects of Monetary Policy in Different Phases of Armenia's Business Cycle By Haykaz Igityan
  6. Fitting Armenian Data to the Simple DSGE Model with Permanent Productivity Growth By Haykaz Igityan; Hovhannes Manukyan
  7. International medium-term business cycles By Hirschbühl, Dominik; Spitzer, Martin
  8. Asymmetric Effects of Monetary Policy on the Armenian Economy By Haykaz Igityan
  9. Uncertainty and Monetary Policy during the Great Recession By Giovanni Pellegrino; Efrem Castelnuovo; Giovanni Caggiano
  10. Efficient and robust inference of models with occasionally binding constraints By Giovannini, Massimo; Pfeiffer, Philipp; Ratto, Marco
  11. Bargaining Shocks and Aggregate Fluctuations By Thorsten Drautzburg; Jesús Fernández-Villaverde; Pablo Guerron-Quintana
  12. Age-Targeted Income Taxation, Labor Supply, and Retirement By Johan Gustafsson
  13. Immigrant Misallocation By Serdar Birinci; Fernando Leibovici; Kurt See
  14. Housing Market Drivers and Dynamics in Armenia By Haykaz Igityan; Hasmik Kartashyan
  15. Optimizing the life cycle path of pension premium payments and the pension ambition in the Netherlands By Harry ter Rele; Carolijn de Kok; Nicoleta Ciurila; Peter Zwaneveld
  16. Modelling the Effects of a Health Shock on the Armenian Economy By Ani Asoyan; Vahagn Davtyan; Haykaz Igityan; Hasmik Kartashyan; Hovhannes Manukyan
  17. Implications of market and political power interactions for growth and the business cycle I: private sector equilibrium By Tryphon Kollintzas; Dimitris Papageorgiou; Vanghelis Vassilatos
  18. Do Elite Colleges Matter? The Impact on Entrepreneurship Decisions and Career Dynamics By Naijia Guo; Charles Ka Yui Leung
  19. Risky Business Cycles By Susanto Basu; Giacomo Candian; Ryan Chahrour; Rosen Valchev
  20. Efficacité de la politique budgétaire en RDC By Banza Mukalay, M’pya
  21. The Hammer and the Dance: Equilibrium and Optimal Policy during a Pandemic Crisis By Tiziana Assenza; Christian Hellwig; Fabrice Collard; Martial Dupaigne; Patrick Fève; Sumudu Kankanamge; Nicolas Werquin
  22. The Environmental Unsustainability of Public Debt: Non-Renewable Resources, Public Finances Stabilization and Growth By Nicolas CLOOTENS; Francesco MAGRIS
  23. In Search of Lost Time: Firm Vintage and Macroeconomic Dynamics By HAMANO Masashige; OKUBO Toshihiro
  24. Optimal Spending and Saving Strategies for Commodity-Rich Countries By Alvaro Aguirre

  1. By: Nurdaulet Abilov (NAC Analytica, Nazarbayev University)
    Abstract: The paper analyzes the sources of business cycle fluctuations in Kazakhstan and the relevance of various frictions in the economy using a medium-scale DSGE model with imperfect exchange rate pass through. We estimate the model via Bayesian methods and present estimates of structural parameters of the model and highlight the role of various shocks in explaining the actual dynamics of observed variables. In the absence of quality and deseasonalized data we show that the DSGE model with time-varying markups possesses a reasonable level of accuracy as the one-sided Kalman filter predictions match the dynamics of the observable variables. Posterior estimates of the model show that the long-run growth rate of output is 4.5% per annum and the exchange rate pass through to domestic prices is between 33% and 40% within a quarter. We also find that risk premium shocks have played an important role in determining the inflation rate, the interest rate and the real exchange rate in the economy since 2015.
    Keywords: DSGE model; Incomplete exchange rate pass through; Bayesian estimation; Emerging economy; Kazakhstan.
    JEL: C11 E30 E32 E37
    Date: 2020–12
  2. By: Vahagn Davtyan (Monetary Policy Department, Central Bank of Armenia); Haykaz Igityan (Monetary Policy Department, Central Bank of Armenia)
    Abstract: This paper develops a DSGE model for a small open economy dividing it into tradable and non-tradable sectors in order to evaluate the impact of structural reforms on the economy for developing countries. The model is constructed and solved in a way that the steady state level of each sector’s employment rate is a function of its sector subsidy level. The economic meaning of such a result is that when a government subsidizes one of the sectors can become over employed. We also discuss the effects of exchange rate depreciation as an unconventional monetary policy tool when there is a ZLB problem or as a tool to boost the economy and to improve the current account. The results show that directly subsidizing the tradable sector can be a better policy than the depreciation of nominal exchange rate for making the economy more export oriented. The reason of such outcomes is the price stickiness of the sectors, which was validated by checking the sensitivity of the model with respect to its structural parameters. To conclude, for closing current account deficit or simply, for improving it the government should implement policies aimed at changing the structure of the economy.
    Keywords: small open economy, DSGE, monetary policy, taxes and subsidies, foreign exchange
    JEL: E12 E37 E52 E65 F31 H25
    Date: 2021–02
  3. By: William Gatt; Noel Rapa; Luca Brugnolini (Central Bank of Malta)
    Abstract: We extend the Central Bank of Malta’s core DSGE model – MEDSEA – with housing and financial frictions to capture the important theoretical links between house prices, credit and consumption. The model features a rich set of features that are inherent to small open economies in a monetary union. We add a borrowing constraint on a subset of households that is contingent on the value of housing wealth and a maximum loan-to-value (LTV) ratio. We also impose capital requirements on the financial intermediary through a minimum capital-to-assets ratio (CAR) constraint. These two requirements form the basis of a typical macroprudential regime in a developed economy. We show how the macroprudential authority can dampen the rise in credit and consumption during a credit boom by using these two policy tools to ‘lean against the wind’. MEDSEA-FIN is therefore tailored to study macro-financial issues related to housing and credit, and the adequate policy responses.
    JEL: C54 E44 E58 E60
    Date: 2020
  4. By: Haavio, Markus; Laine, Olli-Matti
    Abstract: We analyze the economic performance of different monetary policy strategies, or rules, in a low interest rate environment, using simulations with a DSGE model which has been estimated for the euro area. We study how often the effective lower bound of interest rates (ELB) is likely to bind, and how much forgone monetary policy accommodation this entails. Macroeconomic outcomes are measured by the mean levels and the volatility of output (gaps), unemployment and inflation. We present three sets of results. First, the macroeconomic costs of the ELB are likely to grow in a non-linear manner if the monetary policy space (the difference between the normal, or average, level of nominal interest rates and the ELB) shrinks. Second, a point inflation target appears to outperform a target range. Third, the (relative) performance of low-for-long (L4L) monetary policy rules depends on the size of the monetary policy space. The L4L rules tend to perform well, if the monetary space is small, but if the space is larger these rules, while stabilizing inflation, may lead to more volatility in the real economy than flexible inflation targeting.
    JEL: E31 E32 E52 E58
    Date: 2021–04–08
  5. By: Haykaz Igityan (Monetary Policy Department, Central Bank of Armenia)
    Abstract: This paper develops empirical models and shows the presence of asymmetric responses of inflation and output in Armenia to the same size of positive and negative monetary policy shocks. Tight monetary policy yields more reduction in output compared to the increase of output in a response to the same size of loose monetary policy. On the other hand, relatively more inflation is created by expansionary policy. The theoretical micro founded model with New Keynesian frictions is developed to explain asymmetries in transmission mechanism of policy. The model is estimated for the Armenian economy using fifteen macroeconomic time series and fifteen structural shocks. Impulse response functions of second order approximated theoretical model, based on estimated structural parameters, match asymmetries from empirical models. The methodology of mixed equations is applied to calculate the contribution of the particular friction in a creation of asymmetry in the transmission mechanism. The asymmetric response of inflation is mostly the result of highly convex Phillips curve of importers. Another part of asymmetry in inflation is created by internal economy’s price setting frictions and labor market rigidities. The significant part of asymmetric response in output is caused by nonlinearities in capital and labor markets. Adding curvatures of the small open economy into the second order approximated model, the size of asymmetry increases through the channel of higher asymmetry in real exchange rate. Third order theoretical moments of simulated models match directions and sizes of observed data. Variance decomposition of output shows that both demand and supply shocks are important drivers of output. The paper does policy experiments in demand and supply driven business cycle environments. In a demand driven growing economy, the aggressive contractionary monetary policy accelerates the decline of output with diminishing effect on inflation. Aggressive expansionary monetary policy increases the efficiency of creating inflation and decreases the stimulation of output in a demand driven recession. When the economy is in supply driven expansion, the increase in reaction of monetary policy accelerates the decline in output with no significant relative impact on inflation. In a supply driven recession, the aggressive response increases the reaction of output with diminishing effect on inflation.
    Keywords: Nonlinear VAR, Simulation, New Keynesian DSGE, Monetary Policy, Asymmetries, Business Cycle, Expansion, Recession, Asymmetric Effects of Monetary Policy
    JEL: C32 E12 E32 E52
    Date: 2019–09
  6. By: Haykaz Igityan (Monetary Policy Department, Central Bank of Armenia); Hovhannes Manukyan (Monetary Policy Department, Central Bank of Armenia)
    Abstract: This paper discusses the evaluation of structural parameters and estimated potential economic growth of Armenia using different specifications of DSGE models. We extend the simple models so that they are consistent with a balanced steady state growth path driven by deterministic labor-augmenting technological progress. Using a Bayesian likelihood approach, paper estimates DSGE models for the Armenian economy using three macro-economic time series. As a result, the dynamics of estimated potential economic growth of the model with demand and mark-up shocks is consistent with economic stylized facts contrary to other models that have no demand and markup shocks or only have one of these shocks. Additionally, estimated potential economic growth of the model with demand and markup shocks shows high correlation with other estimates of Central Bank of Armenia. Paper then structures and estimates two specifications of simple RBC model and the estimated potential economic growth of the model with persistent permanent productivity is identical with DSGE’s one. We show that our models are able to beat Vector Autoregression (VAR) models in out-of-sample forecasting of economic growth.
    Keywords: Bayesian Estimation, VAR, Real Business Cycles, DSGE
    JEL: C11 C32 E12 E32
    Date: 2020–01
  7. By: Hirschbühl, Dominik; Spitzer, Martin
    Abstract: Foreign driven medium-term oscillations that originate from fluctuations in technological frontier countries gained widespread attention among policymakers. To study this phenomenon in the context of domestic and other foreign drivers of the euro area business cycle, we develop a medium-scale, two-economy dynamic stochastic general equilibrium model with endogenous growth and estimate it with Bayesian methods for the United States and the euro area for the period from 1984:Q1 to 2017:Q4. The framework suggests that foreign shocks can be a substantial source of medium-term oscillations that contribute to pro-cyclicality of real GDP across countries. Notably, US shocks to liquidity preference and trade demand explain more than a third of the euro area downturn during the Great Recession. JEL Classification: E2, E5, F1, F4, O4
    Keywords: Bayesian estimation, endogenous growth, R&D, resilience, two-economy DSGE
    Date: 2021–04
  8. By: Haykaz Igityan (Monetary Policy Department, Central Bank of Armenia)
    Abstract: Whether inflation and output respond symmetrically or asymmetrically to contractionary and expansionary monetary policy shock of the same size has important policy implications. This paper shows the presence of asymmetric responses in Armenian inflation and output to positive and negative monetary policy shocks of the same size by employing econometric models. Contractionary policy decreases inflation less than expansionary policy increases it. Output reacts in the opposite way. An estimated small open economy DSGE model with sticky wages and investment adjustment costs explains about half of the asymmetry observed in the monetary policy transmission mechanism. This paper finds that the main part of inflation reaction asymmetry is a result of a highly convex Phillips curve for the importers. The nonlinearities of the internal economy explain the predominant part of the asymmetry in output reaction.
    Keywords: nonlinear VAR, New Keynesian Model, monetary policy, asymmetries, business cycle, expansion, recession, asymmetric effects of monetary policy
    JEL: C32 E12 E32 E52
    Date: 2021–03
  9. By: Giovanni Pellegrino; Efrem Castelnuovo; Giovanni Caggiano
    Abstract: We employ a nonlinear VAR framework and a state-of-the-art identification strategy to document the large response of real activity to a financial uncertainty shock during and in the aftermath of the great recession. We replicate this evidence with an estimated DSGE framework featuring a concept of uncertainty comparable to that in our VAR. We then use the estimated framework to quantify the output loss due to the large uncertainty shock that materialized in 2008Q3. We find such a shock to be able to explain about 60% of the output loss in the 2008-2014 period. The same estimated model unveils the role successfully played by the Federal Reserve in limiting the output loss that would otherwise have occurred had monetary policy been conducted as in normal times. Finally, we show that the rule estimated during the great recession is able to deliver an economic outcome closer to the flexible price one than the rule describing the Federal Reserve's conduct in normal times.
    Keywords: uncertainty shock, nonlinear IVAR, nonlinear DSGE framework, minimum-distance estimation, great recession
    JEL: C22 E32 E52
    Date: 2021
  10. By: Giovannini, Massimo (European Commission); Pfeiffer, Philipp (European Commission); Ratto, Marco (European Commission)
    Abstract: This paper proposes a piecewise-linear Kalman filter (PKF) to estimate DSGE models with occasionally binding constraints. This method expands the set of models suitable for nonlinear estimation. It straightforwardly handles missing data, non-singularity (more shocks than observed time series), and large-scale models. We provide several applications to highlight its efficiency and robustness compared to existing methods. Our toolkit integrates the PKF into Dynare, the most popular software in DSGE modeling.
    Keywords: DSGE, occasionally binding constraints, nonlinear estimation, Piecewise Kalman Filter
    JEL: C11 C32 C51
    Date: 2021–04
  11. By: Thorsten Drautzburg; Jesús Fernández-Villaverde; Pablo Guerron-Quintana
    Abstract: We argue that social and political risk causes significant aggregate fluctuations by changing workers’ bargaining power. Using a Bayesian proxy-VAR estimated with U.S. data, we show how distribution shocks trigger output and unemployment movements. To quantify the aggregate importance of these distribution shocks, we extend an otherwise standard neoclassical growth economy. We model distribution shocks as exogenous changes in workers’ bargaining power in a labor market with search and matching. We calibrate our economy to the U.S. corporate non-financial business sector, and we back out the evolution of workers’ bargaining power. We show how the estimated shocks agree with the historical narrative evidence. We document that bargaining shocks account for 28% of aggregate fluctuations and have a welfare cost of 2.4% in consumption units.
    Keywords: distribution risk, bargaining shocks, aggregate fluctuations, partial filter, historical narrative
    JEL: E32 E37 E44 J20
    Date: 2021
  12. By: Johan Gustafsson
    Abstract: This paper studies the life-cycle effects of favorable marginal tax treatment of older workers on their optimal life cycle labor supply, retirement timing, and savings. I develop a structural model in continuous time where the life-cycle of a representative agent is divided into three distinct phases: pre-treatment, post-treatment, and retirement. Solutions for consumption/savings, labor supply/leisure, and retirement timing are then obtained by solving the model as a salvage value problem. I then calibrate the model to Swedish earnings data and find that the increased extensive margin labor supply is partially offset by a reduction in hours worked during the pre-treatment period. The total effect is however an increase in life-cycle labor supply and consumption.
    Keywords: retirement age, life cycle, tax heterogeneity, savings consumption, leisure
    JEL: D15 J22 J26
    Date: 2021
  13. By: Serdar Birinci; Fernando Leibovici; Kurt See
    Abstract: We quantify the barriers that impede the integration of immigrants into foreign labor markets and investigate their aggregate implications. We develop a model of occupational choice with natives and immigrants of multiple types whose decisions are subject to wedges which distort their allocation across occupations. We estimate the model to match salient features of U.S. and cross-country individual-level data. We find that there are sizable GDP gains from removing the wedges faced by immigrants in U.S. labor markets, accounting for approximately one-fifth of the overall economic contribution of immigrants to the U.S. economy. These effects arise from both increased flows from non-participation to predominantly manual jobs as well as from reallocation within the market sector that raises productivity in non-routine cognitive jobs. We contrast our findings for the U.S. with estimates for 11 high-income countries and document substantial differences in the magnitude of immigrant wedges across countries. Importantly, we find differences in the distribution of immigrant wedges across occupations lead to substantial variation in the gains from removing immigrant misallocation, even among countries with similar average degrees of distortions.
    Keywords: Immigration; Occupational Barriers; Mobility; Misallocation
    JEL: J24 J31 J61
    Date: 2021–04
  14. By: Haykaz Igityan (Monetary Policy Department, Central Bank of Armenia); Hasmik Kartashyan (Monetary Policy Department, Central Bank of Armenia)
    Abstract: This paper develops VAR model for Armenia with housing price and estimates the impact of housing price on GDP growth and inflation. Passthrough results show, that 1% increase in real housing price creates from 0.03 to 0.09% inflation and increases GDP by around 0.25% in the long run. Paper then discusses simple housing decision model and incorporates it into DSGE framework. Households are allowed to divide their disposable housing stock into private consumption and lend out to firms for commercial purposes. Having borrowing constraint in the model enables to generate both borrowing and housing cycles. Balance sheet channel allows to explain the empirically observed estimates of the effects of housing prices on the Armenian economy. According to the theoretical model’s results, the long-run response of inflation to the real housing price increase as a result of housing market’s specific shocks is estimated to lie in the interval of 0.045-0.118%, which is very close to empirical estimates. Moreover, model estimated commercial housing preference cycle is consistent with historical events of the Armenian economy.
    Keywords: Commercial and personal housing, Real estate, Housing price, DSGE model, Borrowing constraint, Bayesian Estimation
    JEL: E31 E44 E52 R21
    Date: 2021–01
  15. By: Harry ter Rele (CPB Netherlands Bureau for Economic Policy Analysis); Carolijn de Kok (CPB Netherlands Bureau for Economic Policy Analysis); Nicoleta Ciurila (CPB Netherlands Bureau for Economic Policy Analysis); Peter Zwaneveld (CPB Netherlands Bureau for Economic Policy Analysis)
    Abstract: Pension premium rates and pension benefits are independent of age or family situation in the second pillar of the Dutch pension system. In a life cycle model calibrated on Dutch data we investigate the optimal arrangement of pension premiums and benefits taking into consideration two factors: the fact that incomes generally rise with age and the presence of children in the early years of the household. Our analysis points out that due to these factors lifetime welfare can be raised by a delay of pension premium payments towards later working ages. A lower pension ambition further enhances lifetime welfare. Taking these factors into consideration when designing the pension system increases lifetime welfare by an amount that equals a 3.4 percent increase in lifetime consumption if no borrowing constraints are imposed and 2.8 percent if, more realistically, we impose these constraints. Family size (i.e. number of children) has a large impact on optimal pension premiums and optimal pension ambition. Policy conclusions from our results should carefully weigh the calculated welfare gain against possible negative and positive effects of non-modelled aspects.
    JEL: D91 G11 G23
    Date: 2021–04
  16. By: Ani Asoyan (Monetary Policy Department, Central Bank of Armenia); Vahagn Davtyan (Monetary Policy Department, Central Bank of Armenia); Haykaz Igityan (Monetary Policy Department, Central Bank of Armenia); Hasmik Kartashyan (Monetary Policy Department, Central Bank of Armenia); Hovhannes Manukyan (Monetary Policy Department, Central Bank of Armenia)
    Abstract: This paper extends the closed economy DSGE model in order to evaluate the impact of the coronavirus on the economy. Our model makes it clear that people's decisions to reduce consumption and working hours due to the health crisis lead to an economic recession. As a result, the spread of the virus declines. Expansionary monetary policy decreases the size of GDP decline, but it is costly in terms of public health. This result shows that there is a trade-off between the output loss caused by the pandemic and the health consequences of the pandemic.
    Keywords: DSGE, health, epidemic, COVID-19
    JEL: E12 E52 I10
    Date: 2020–12
  17. By: Tryphon Kollintzas (Athens University of Economics and Business and CEPR); Dimitris Papageorgiou (Bank of Greece); Vanghelis Vassilatos (Athens University of Economics and Business, Econometrics Laboratory, IMOP)
    Abstract: In this paper, we develop a two sector DSGE model with market and political power interactions. These interactions are motivated by the politico-economic systems of several South European countries, over the last half century. In these countries the state permits the existence of industries, typically related to the extended public sector, where firms and workers employed therein have market power (insiders), unlike other firms and workers in the economy (outsiders), as insiders, that dominate the major political parties, cooperate to influence government decisions, including those that pertain to the very existence of such a politico-economic system. Consistently with stylized facts of growth and the business cycle of these countries, the model predicts: (i) large negative deviations of per capita GDP from what these countries would have been capable of, if their politico-economic system was not characterized by the above mentioned frictions; and (ii) deeper and longer recessions in response to negative shocks, as their politico-economic system reacts so as to amplify these shocks.
    Keywords: Growth; Business Cycles; Southern European Economies; Insiders-Outsiders; Politico-economic Equilibrium; Amplification Effect
    JEL: E20 E32 H42 J51 P16
    Date: 2021–03
  18. By: Naijia Guo (Chinese University of Hong Kong); Charles Ka Yui Leung (City University of Hong Kong)
    Abstract: Elite college attendance significantly impacts students' entrepreneurship decisions and career dynamics. We find that an elite college degree is positively correlated with entrepreneurship (i.e., owning an incorporated business) but not with other self-employment forms. Our overlapping generations model captures self-selection in education and career choices based on heterogeneous ability and family wealth endowments over the life-cycle. Our estimates show that (1) entrepreneurs and other self-employed individuals require different types of human capital, and (2) elite colleges generate considerably more human capital gain than ordinary colleges, particularly for entrepreneurs. Distinguishing between elite and ordinary colleges improves our prediction of entrepreneurship decisions. Providing subsidies for elite colleges is more efficient than subsidizing their ordinary counterparts to encourage entrepreneurship, enhance intergenerational mobility, and enhance welfare. In contrast, although start-up subsidy increases entrepreneurship, it does not improve their performance, and it is inferior to education subsidy in generating efficiency, equality, and intergenerational mobility.
    Keywords: entrepreneurship, elite college, intergenerational transfer
    JEL: D15 I20 J24
    Date: 2021–03–10
  19. By: Susanto Basu (Boston College); Giacomo Candian (HEC Montréal); Ryan Chahrour (Boston College); Rosen Valchev (Boston College)
    Abstract: We identify a shock that explains the bulk of fluctuations in equity risk premia, and show that the shock also explains a large fraction of the business-cycle comovements of output, consumption, employment, and investment. Recessions induced by the shock are associated with reallocation away from full-time permanent positions, towards part-time and flexible contract workers. A real model with labor market frictions and fluctuations in risk appetite can explain all of these facts, both qualitatively and quantitatively. The size of risk-driven fluctuations depends on the relationship between the riskiness and productivity of different stores of value: if safe savings vehicles have relatively low marginal products, then a flight to safety will drive a larger aggregate contraction.
    Keywords: Business Cycles; Risk Premia; Uncertainty
    JEL: E32 E24
    Date: 2021–04–07
  20. By: Banza Mukalay, M’pya
    Abstract: Cette étude fait ressortir l’impact d’une variation des impôts et taxes sur la production nationale et la demande agrégée tout en insistant sur l’influence des ménages non ricardiens. En outre, elle évalue (i) la valeur des multiplicateurs des dépenses et ceux fiscaux ainsi que (ii) les sources des fluctuations de la production. En recourant à l’estimation bayesienne d’un modèle d’équilibre général dynamique et stochastique (DSGE) à l’aide des données trimestrielles de 1998-2018, les résultats démontrent d’un côté qu’une hausse des dépenses publiques accroît significativement la production, la consommation et l’investissement privé–avec un multiplicateur des dépenses évalué en moyenne à 0.36 à court terme–si une grande proportion des dépenses est affectée à l’investissement public. De l’autre côté, une baisse des impôts et taxes a un effet positif et significatif sur la production et la demande globale, avec un multiplicateur fiscal fixé à 0.14 en moyenne et à court terme. Cette efficacité est due au fait que la proportion des ménages non ricardiens (90%) est très élevée, permettant ainsi de stimuler l’économie. En outre, les variations cycliques de la production sont majoritairement expliquées par les chocs d’investissement public et de la taxe sur la consommation.
    Keywords: DSGE; Estimation bayesienne; Ménages ricardiens; Ménages non ricardiens; Multiplicateur; Politique budgétaire
    JEL: E32 E62
    Date: 2021–04
  21. By: Tiziana Assenza (TSE - Toulouse School of Economics - UT1 - Université Toulouse 1 Capitole - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Christian Hellwig (Unknown); Fabrice Collard (TSE - Toulouse School of Economics - UT1 - Université Toulouse 1 Capitole - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Martial Dupaigne (Unknown); Patrick Fève (Unknown); Sumudu Kankanamge (Unknown); Nicolas Werquin (Unknown)
    Abstract: We develop a comprehensive framework for analyzing optimal economic policy during a pandemic crisis in a dynamic economic model that trades off pandemic-induced mortality costs against the adverse economic impact of policy interventions. We use the comparison between the planner problem and the dynamic decentralized equilibrium to highlight the margins of policy intervention and describe optimal policy actions. As our main conclusion, we provide a strong and novel economic justification for the current approach to dealing with the pandemic, which is different from the existing health policy rationales. This justification is based on a simple economic concept, the shadow price of infection risks, which succinctly captures the static and dynamic trade-offs and externalities between economic prosperity and mortality risk as the pandemic unfolds.
    Date: 2021–03–31
  22. By: Nicolas CLOOTENS; Francesco MAGRIS
    Keywords: , Non-renewable Resources, Growth , Public Finances , Overlapping Generations
    Date: 2021
  23. By: HAMANO Masashige; OKUBO Toshihiro
    Abstract: This paper attempts to reproduce the past landscape of the economy with the help of evidence and structural models. For that purpose, we built a theoretical model consisting of endogenous firm entry and firm selection. Given the distribution of firm age and firm sales that we see today, we simulated age-specific technologies and fixed costs for operation. With these simulated parameters, we then reestablished the macroeconomic dynamics of each historical firm. With Japanese data from over 126 years, despite the massive presence of firms created after the Second World War until the oil crisis in the 1970s, we found that these historical firms show relatively low productivity. Old historical firms are subject to high fixed costs and high productivity. Finally, we demonstrated that our counterfactual fixed costs dramatically change the landscape of historical firms, as well as their characteristics.
    Date: 2021–03
  24. By: Alvaro Aguirre
    Abstract: This paper builds a quantitative model to assess the optimal allocation of resources in an economy that is subject to a volatile source of income such as commodity exports, and with imperfect access to international financial markets. In this context the government faces a trade-off between smoothing expenditures and accumulating assets for precautionary motives, as well as saving in riskfree assets and investing in physical capital. The features of the model and the solution method allow for a detailed exploration of the trade-offs involved, particularly those related to volatility and uncertainty. The analysis sheds light about optimal saving and spending in stochastic environments, and best responses to large shocks and to permanent changes in stochastic processes.
    Date: 2021–03

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