nep-dge New Economics Papers
on Dynamic General Equilibrium
Issue of 2023‒02‒13
twenty-two papers chosen by
Christian Zimmermann
Federal Reserve Bank of St. Louis

  1. Leaning against persistent financial cycles with occasional crises By Thore Kockerols; Erling Motzfeldt Kravik; Yasin Mimir
  2. Government Debt Deleveraging in the EMU By Cole, Alexandre Lucas; Guerello, Chiara; Traficante, Guido
  3. (Un)Conventional Monetary and Fiscal Policy By Jing Cynthia Wu; Yinxi Xie
  4. House Price Expectations, Household Indebtedness and Macroprudential Policy in Slovakia By Indrani Manna; Martin Suster; Biswajit Banerjee
  5. Fiscal Progressivity and the Time Consistency of Monetary Policy By Antoine Camous
  6. "Monetary Policy and Endogenous Financial Crises" By Frédéric Boissay; Fabrice Collard; Jordi Gali; Cristina Manea
  7. Inflation Surprises in a New Keynesian Economy with a True Consumption Function By Roberto Tamborini
  8. The One-Child Policy and Household Saving By Taha Choukhmane; Nicolas Coeurdacier; Keyu Jin
  9. Firm Heterogeneity, Industry Dynamics and Climate Policy By Ara Jo; Christos Karydas
  10. Energy Prices and Household Heterogeneity: Monetary Policy in a Gas-TANK By Chan, Jenny; Diz, Sebastian; Kanngiesser, Derrick
  11. What’s Driving the Decline in Entrepreneurship? By Nicholas Kozeniauskas
  12. Accounting for the role of investment frictions in recessions By del Río, Fernando; Lores, Francisco-Xavier
  13. Usual Shocks in our Usual Models By Filippo Ferroni; Jonas D. M. Fisher; Leonardo Melosi
  14. A single monetary policy for heterogeneous labour markets: the case of the euro area By Sandra Gomes; Pascal Jacquinot; Matija Lozej
  15. Immigration and the Adequacy of Labor Force – Evaluation of the Economic Effects By Alho, Juha; Kangasharju, Aki; Lassila, Jukka; Valkonen, Tarmo
  16. On Speculative Frenzies and Stabilization Policy By Gadi Barlevy
  17. Search, Transport Costs, and Labor Markets in South Africa By Kishan Shah; Federico Sturzenegger
  18. The Macroeconomic Consequences of Subsistence Self-Employment By Sergio Ocampo; Juan Herreño
  19. Premature deaths, accidental bequests and fairness By Marc Fleurbaey; Marie-Louise Leroux; Pierre Pestieau; Gregory Ponthiere; Stéphane Zuber
  20. Medium term endogenous fluctuations in three-sector optimal growth models By Kazuo Nishimura; Florian Pelgrin; Alain Venditti
  21. Identification and Estimation of Continuous-Time Job Search Models with Preference Shocks By Attila Gyetvai; Peter Arcidiacono; Arnaud Maurel; Ekaterina Jardim
  22. Can the stock market boost economic growth? Evidence from the Mexican real estate investment trust (REIT) By Razo-De-Anda, Jorge Omar; Cruz-Aké, Salvador; Venegas-Martínez, Francisco

  1. By: Thore Kockerols; Erling Motzfeldt Kravik; Yasin Mimir
    Abstract: Should central banks use leaning against the wind (LAW)-type monetary or macroprudential policy to address risks to financial stability? We first assess LAW as a one-off (nonsystematic) policy using an estimated large-scale dynamic stochastic general equilibrium (DSGE) model with empirically plausible persistent financial cycles and a stylised regime-switching (RS) framework of occasional crises. We then evaluate policy-rule based (systematic) LAW using an endogenous RS version of our DSGE model with financial crises, effective lower bound (ELB) on interest rates, and an asymmetric LAW policy. Our findings do not support LAW by monetary policy because the costs of depressing the economy in normal times far outweigh the benefits of a less likely and less severe crisis. LAW increases inflation volatility significantly as it amplifies the effects of supply shocks on inflation. It also leads to higher long-run output costs in the case of nonsystematic policy and to a lower mean inflation rate in the case of systematic policy. The latter also results in more frequent ELB episodes due to the lower mean inflation rate it induces. We find that LAW is only advisable if the policymaker cares more about output stability relative to inflation stability or if financial cycles are less persistent, exclusively under systematic LAW. Higher long-run capital requirements in normal times address risks to financial stability better as they reduce the fluctuations in inflation and output considerably.
    Keywords: leaning against the wind, monetary policy, financial cycle, macroprudential policy
    JEL: E52 E58 G01
    Date: 2021–10
  2. By: Cole, Alexandre Lucas; Guerello, Chiara; Traficante, Guido
    Abstract: We evaluate the stabilization properties of several rules and instruments to reduce government debt in a Currency Union, like the EMU. In a two-country New-Keynesian DSGE model, with a debt-elastic government bond spread and incomplete international financial markets, we study the effects of government debt deleveraging, under different scenarios for fiscal policy coordination. We find that greater stabilization is achieved when the two countries coordinate by stabilizing net exports. Moreover, we find that taxes are a better instrument for deleveraging compared to government transfers. Our policy prescriptions for the Euro Area are to reduce government debt less during recessions and liquidity traps, and to do so using distortionary taxes, while concentrating on reducing international demand imbalances.
    Keywords: Sovereign Debt, International Policy Coordination, Monetary Union, New Keynesian
    JEL: E12 E63 F42 F45 H63
    Date: 2023–01–08
  3. By: Jing Cynthia Wu; Yinxi Xie
    Abstract: We build a tractable New Keynesian model to study four types of monetary and fiscal policy. We find that quantitative easing (QE), lump-sum fiscal transfers, and government spending have the same effects on the aggregate economy when fiscal policy is fully tax financed. Compared with these three policies, conventional monetary policy is more inflationary for the same amount of stimulus. QE and transfers have redistribution consequences, whereas government spending and conventional monetary policy do not. Ricardian equivalence breaks down: tax-financed fiscal policy is more stimulative than debt-financed policy. Finally, we study optimal policy coordination and find that adjusting two types of policy instruments—the policy rate together with QE or fiscal transfers—can stabilize three targets simultaneously: inflation, the aggregate output gap, and cross-sectional consumption dispersion.
    Keywords: Fiscal policy; Monetary policy
    JEL: E E4 E61 E62 E63
    Date: 2023–01
  4. By: Indrani Manna; Martin Suster; Biswajit Banerjee (National Bank of Slovakia)
    Abstract: By incorporating a data generating process for house price expectations in a standard new-Keynesian DSGE model calibrated to Slovakia, this paper differentiates between the macroeconomic impact of endogenous and exogenous sources of expectation shocks and the role of fiscal and macroprudential policy (in the absence of monetary policy) in managing these shocks in the housing market. The paper concludes that endogenous shocks pre-dominate exogenous shocks to expectations in home prices in accelerating credit growth and household indebtedness. But endogenous shocks can still be accredited with ’good housing booms’ tag as they raise the ability to pay-off rising debt significantly. In terms of policy, the paper finds that loan-to-value ratios score over payment to income ratios as a potent macroprudential instrument to manage housing market dynamics as constraint switching is limited in case of LTV because of an expectation sensitive factor market. Macroprudential instruments set as a function of household debt to GDP ratio reinforces the transmission channels and turn out to be counterproductive in case of endogenous shocks but effective in managing exogenous shocks. The paper also finds that property tax can be potential instrument to arrest rising house prices, but it works effectively in coordination with other policies. We also show that endogenous refinancing decisions of households can be effectively used as a channel for transmission of monetary and macroprudential policy through timely coordination of two policies.
    JEL: E30 E44 E50
    Date: 2022–10
  5. By: Antoine Camous
    Abstract: This paper studies how progressive fiscal policy influences the conduct of monetary policy in a tractable heterogeneous agent economies. A priori, progressive labor taxation is undesirable because it generates costly distortions. Nonetheless, it is an effective instrument to mitigate the inflation bias of monetary policy because it achieves a redistributive purpose. I analyze this commitment channel of progressive labor taxes through the lens of political conflicts. When agents vote on monetary and fiscal instruments, progressivity is decisive in curbing the inflation bias because it generates distributional conflicts, lower-productivity agents support higher labor taxes to preserve the consumption value of money holding and shift the burden of policy distortions to higher-productivity agents. Anticipating the reduction in inflation, agents unanimously desire to adopt a progressive fiscal system.
    Keywords: Monetary-Fiscal Policy, Progressive Labor Income Taxes, Inflation Bias, Time Consistency, Political Economy, Heterogeneous Agents
    JEL: E02 E42 E52 E61 E62
    Date: 2023–01
  6. By: Frédéric Boissay (BIS - Bank for International Settlements); Fabrice Collard (TSE-R - Toulouse School of Economics - UT1 - Université Toulouse 1 Capitole - Université Fédérale Toulouse Midi-Pyrénées - 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); Jordi Gali (CREI - Centre de Recerca en Economia Internacional - UPF - Universitat Pompeu Fabra [Barcelona]); Cristina Manea (BIS - Bank for International Settlements)
    Abstract: We study whether a central bank should deviate from its objective of price stability to promote financial stability. We tackle this question within a textbook New Keynesian model augmented with capital accumulation and microfounded endogenous financial crises. We compare several interest rate rules, under which the central bank responds more or less forcefully to inflation and aggregate output. Our main findings are threefold. First, monetary policy affects the probability of a crisis both in the short run (through aggregate demand) and in the medium run (through savings and capital accumulation). Second, a central bank can both reduce the probability of a crisis and increase welfare by departing from strict inflation targeting and responding systematically to fluctuations in output. Third, financial crises may occur after a long period of unexpectedly loose monetary policy as the central bank abruptly reverses course.
    Keywords: Financial crisis, monetary policy
    Date: 2023–01–02
  7. By: Roberto Tamborini
    Abstract: The resurgence of inflation since the late 2021 is now accompanied by a reversal of prospects of growth, reviving fears of stagflation across the world (IMF 2022, World Bank 2022). In almost all accounts of the mounting stagflation threats a prominent role is played by the fall of households' purchasing power, and hence consumption, owing to the inflation shock visà-vis nominal wages lagging behind. The theoretical issue that motivates this paper is that this endogenous real income effect of inflation surprises, independent of restrictive monetary policy, is not present in the standard New Keynesian models for monetary policy. The paper shows how this channel can be introduced reformulating the consumption function, with the consequence that it exerts a stabilisation effect on inflation endogenously. By means of simulations the paper discusses the main monetary policy implication: what is the role left to monetary policy which purports to curb inflation in the same way?
    Keywords: cost-push inflation, real income effect, stagflation, New Keynesian models for monetary policy
    JEL: E17 E30 E50
    Date: 2022
  8. By: Taha Choukhmane (MIT Sloan - Sloan School of Management - MIT - Massachusetts Institute of Technology, NBER - National Bureau of Economic Research [New York] - NBER - The National Bureau of Economic Research); Nicolas Coeurdacier (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique, CEPR - Center for Economic Policy Research - CEPR); Keyu Jin (LSE - London School of Economics and Political Science)
    Abstract: We investigate whether the 'one-child policy' has contributed to the rise in China's household saving rate and human capital in recent decades. In a life-cycle model with intergenerational transfers and human capital accumulation, fertility restrictions lower expected old-age support coming from children-inducing parents to raise saving and education investment in their offspring. Quantitatively, the policy can account for at least 30% of the rise in aggregate saving. Using the birth of twins under the policy as an empirical out-of-sample check to the theory, we find that quantitative estimates on saving and education decisions line up well with micro-data.
    Keywords: Life Cycle saving, Fertility, Human Capital, Intergenerational Transfers
    Date: 2023–01–09
  9. By: Ara Jo (Department of Economics, University of Bath, 3 East, BA2 7AY, Bath, United Kingdom); Christos Karydas (Center of Economic Research, ETH Zurich, Zurichbergstrasse 18, 8092 Zurich, Switzerland)
    Abstract: We develop a dynamic general equilibrium model to quantify the interaction between climate policy, industry dynamics, and the elasticity of substitution between clean and dirty energy in the economy. The model incorporates empirical observations that firms differ substantially in their potential for energy substitution and that the economy is growing more capable of substituting clean for dirty energy over time as environmental regulation becomes more stringent. Our model highlights the effect of dynamic industry response on increasing the average elasticity of substitution in the economy due to the exit of least flexible firms in response to climate policy. The higher average elasticity of substitution increases the effectiveness of the policy at reducing emissions, resulting in a 35 percent decrease in the size of the carbon tax required to achieve carbon neutrality
    Keywords: industry dynamics, elasticity of substitution, climate policy
    JEL: Q40 Q55 Q54 O33
    Date: 2023–01
  10. By: Chan, Jenny; Diz, Sebastian; Kanngiesser, Derrick
    Abstract: How does household heterogeneity affect the transmission of an energy price shock? What are the implications for monetary policy? We develop a small, open-economy TANK model that features labor and an energy import good as complementary production inputs (Gas-TANK). Given such complementarities, higher energy prices reduce the labor share of total income. Due to borrowing constraints, this translates into a drop in aggregate demand. Higher price flexibility insures firm profits from adverse energy price shocks, further depressing labor income and demand. We illustrate how the transmission of shocks in a RANK versus a TANK depends on the degree of complementarity between energy and labor in production and the degree of price rigidities. Optimal monetary policy is less contractionary in a TANK and can even be expansionary when credit constraints are severe. Finally, the contractionary effect of an energy price shock on demand cannot be generalized to alternate supply shocks, as the specific nature of the supply shock affects how resources are redistributed in the economy.
    Keywords: Heterogenous agent models, business cycle fluctuations, energy, monetary policy
    JEL: E5
    Date: 2022–10
  11. By: Nicholas Kozeniauskas
    Abstract: Why has there been a steady decline in entrepreneurship in the US in recent decades? To answer this question, I develop a general equilibrium occupation choice model and combine it with data on these choices. Skill-biased technical change can account for much of the decline in the relative entrepreneurship rate of more educated people, but cannot explain the decline in the aggregate level of entrepreneurship. The major factors in the decline in the share of people who are entrepreneurs, the firm entry rate, and the size of the entrepreneur sector are rising entry costs and outsized productivity gains by large non-entrepreneur firms.
    JEL: E23 E24 J24 J31
    Date: 2022
  12. By: del Río, Fernando; Lores, Francisco-Xavier
    Abstract: We conduct Business Cycle Accounting analyses for both the Euro Area and the United States. If the observed changes in the factor income shares reflect the frictionless competitive adjustment of productive factors, then we find that the capital-efficiency wedge was the main force driving the output growth slowdown during the U.S. Great Recession, with the labour and investment wedges being significant, but secondary forces. The countercyclical evolution of the labour-efficiency wedge helped to mitigate the output growth slowdown. Our results suggest that the investment frictions, which raise the firm's costs of investment, may be the primary cause of the U.S. Great Recession. However, in the U.S. 1982 Recession and the Euro Area Great Recession, the labour-efficiency wedge was the main driving force of the output growth slowdown, with the labour wedge being a significant, but secondary force and the investment wedge being negligible.
    Keywords: Business Cycle Accounting, Capital-Efficiency Wedge, Labour-Efficiency Wedge, Labour Wedge, Investment Wedge, Resource Constraint Wedge, Productivity, Labour Share, Hours Worked, Great Recession.
    JEL: E13 E32 O40
    Date: 2023–01–17
  13. By: Filippo Ferroni; Jonas D. M. Fisher; Leonardo Melosi
    Abstract: We propose an event-study research design to identify the nature and propagation of large unusual shocks in DSGE models and apply it to study the macroeconomic effects of the Covid shock. The initial outbreak is represented as the onset of a new shock process where the shock loads on wedges associated with the model's usual shocks. Realizations of the Covid shock come with news about its propagation, allowing us to disentangle the role of beliefs about the future of the pandemic. The model attributes a crucial role to the novel Covid shock in explaining the large contraction in output in the second quarter of 2020 and the rebound in growth expected at the same time. The Covid shock loads significantly on wedges that generate both demand and supply effects but, on net, supply forces dominate. The effects of Covid on hours worked are quite persistent, although the successive pandemic waves (e.g., the Delta wave) have a progressively smaller impact on the macroeconomy. Our methods provide a foundation to estimate structural models with data that include the pandemic without having to specify a micro-founded epidemiological block.
    Keywords: Covid-19; pandemic; DSGE model; Survey of Professional Forecasters (SPF); business cycles
    JEL: C51 E10 E31 E32 E52
    Date: 2022–09–06
  14. By: Sandra Gomes; Pascal Jacquinot; Matija Lozej
    Abstract: Differences in labour market institutions and regulations between countries of the monetary union can cause divergent responses even to a common shock. We augment a multi-country model of the euro area with search and matching framework that differs across Ricardian and hand-to-mouth households. In this setting, we investigate the implications of crosscountry heterogeneity in labour market institutions for the conduct of monetary policy in a monetary union. We compute responses to an expansionary demand shock and to an inflationary supply shock under the Taylor rule, asymmetric unemployment targeting, and average inflation targeting. For each rule we distinguish between cases with zero weight on the unemployment gap and a negative response to rising unemployment Across all rules, responding to unemployment leads to lower losses of employment and higher inflation. Responding to unemployment reduces cross-country differences within the monetary union and the differences in consumption levels of rich and poor households.
    JEL: E24 E32 E43 E52 F45
    Date: 2023
  15. By: Alho, Juha; Kangasharju, Aki; Lassila, Jukka; Valkonen, Tarmo
    Abstract: Abstract This Report analyzes the impacts of population ageing on the Finnish economy and the possibilities to avoid its negative effects by increasing net migration. Our calculations show that a yearly net migration of 44, 000 persons is needed to stabilize the size of the birth cohorts and the labor force with the current age and gender structure of net migration. The reason for a such high number is the projected low total fertility rate. As a baseline for our economic analysis, we consider future net migration of 15, 000 persons, also projected by Statistics Finland. We utilize in our numerical calculations a dynamic general equilibrium model, which provides, e.g., the change in investments induced by the additional migration. The calculations require many assumptions related, for example, to the educational level and the use of social services of the immigrants. This means that the economic results must be considered as approximate. The results indicate that the assumed immigration would have large positive effects on the economic growth and especially on the fiscal sustainability.
    Keywords: Migration, Population projection, Economy
    JEL: J11 H68
    Date: 2023–02–03
  16. By: Gadi Barlevy
    Abstract: This paper examines whether tasking central banks with leaning against asset booms can conflict with their existing mandates to stabilize goods prices and output. The paper embeds the Harrison and Kreps (1978) model of speculative booms in a monetary model based on Rocheteau, Weill, and Wong (2018). In the model, a speculation shock that generates an asset boom is associated with higher output but a lower price level, unlike aggregate demand shocks that raise both output and prices. This creates a trilemma for central banks in that contemporaneous monetary policy cannot simultaneously stabilize output, the price level, and real asset prices. Stabilizing all three requires alternative policies.
    Date: 2022–08–03
  17. By: Kishan Shah (Center for International Development at Harvard University); Federico Sturzenegger
    Abstract: South Africa’s labor market exhibits a unique equilibrium with one of the highest unemployment rates in the world and yet a low level of informal employment. The unemployment rate has remained high and persistent over recent decades, in spite of the formal demise of the apartheid regime and subsequent transition to democracy in 1994. This paper uses a matching model of the labor market to argue that spatial considerations combined with low productivity of informal work may be responsible for such an outcome. Spatial dispersion inherited from the apartheid regime thins the labor market, creating exclusion and perpetuating spatial segregation. In most developing countries, the result would be higher employment in informal or own account employment. However, with low productivity in the informal sector, the high rate of exclusion shows itself in higher unemployment rates instead. Transportation costs and housing deregulation may become key factors in improving the working of the labor market in South Africa especially if it is not possible to raise informal productivity.
    Keywords: South Africa, labor markets
    Date: 2023–01
  18. By: Sergio Ocampo (University of Western Ontario); Juan Herreño (University of California San Diego)
    Abstract: We evaluate the aggregate effects of expansions of credit supply in environments where subsistence self-employment is prevalent. We extend a standard macro development model to include unemployment risk, which becomes a key driver of selection into self-employment. The model is consistent with the joint distribution of earnings and occupations, the reaction of wages to labor demand shocks, and the small effects of expansions in the supply of microloans on the earnings of the self-employed. We find that the elasticity of aggregate output to expansions in credit supply is proportional to the elasticity of individual earnings. This proportionality arises due to the muted effects of wages in general equilibrium in the presence of subsistence self-employment, and is not present in models without subsistence self-employment due to a larger wage response, and a larger crowding-out of private savings in response to a higher availability of credit.
    Keywords: Self-Employment, Unemployment, Development, Micro-Finance
    JEL: E44 O11 O16 O17
    Date: 2023
  19. By: Marc Fleurbaey (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Marie-Louise Leroux (ESG-UQAM - UQAM - Université du Québec à Montréal = University of Québec in Montréal); Pierre Pestieau (Université de Liège); Gregory Ponthiere (UCL - Université Catholique de Louvain = Catholic University of Louvain); Stéphane Zuber (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)
    Abstract: While little agreement exists regarding the taxation of bequests in general, there is a widely held view that accidental bequests should be subjected to a confiscatory tax. We reexamine the optimal taxation of accidental bequests by introducing a concern for compensating individuals for a premature death. Assuming that individuals care about what they leave to their offspring, we show that, whereas the 100 % tax view holds under the utilitarian criterion, the ex post egalitarian criterion (giving priority to the worst-off ex post) implies subsidizing accidental bequests so as to compensate the short-lived. In a second-best setting, compensating the short-lived justifies taxing total bequests at a rate increasing with the age of the deceased. Finally, when the model is extended to an intergenerational setting, accidental bequests cannot be used as a redistributive tool anymore, so that ex post egalitarianism rejoins the 100 % tax view.
    Keywords: mortality, accidental bequests, optimal taxation, compensation, OLG models
    Date: 2022
  20. By: Kazuo Nishimura (RIEB, Kobe University, Japan); Florian Pelgrin (EDHEC Business School); Alain Venditti (Aix-Marseille Univ, CNRS, AMSE, Marseille, France)
    Abstract: Following the recent contribution of Beaudry et al. [8], we exploit a three-sector optimal growth model without frictions to provide new insights regarding the emergence of endogenous medium-term fluctuations. Notably, our 3-sector model shows that matching the empirical evidence critically depends on agents' preferences, particularly the consumption of a bundle of (at least) two final goods. Endogenous fluctuations are therefore likely to occur through both relative inter-sector differences in capital intensity and intertemporal consumption allocations based on substitution effects between the two final consumed goods. We thoroughly characterize the economy's dynamics and establish the existence of clear conditions related to (Hopf) bifurcation values, as well as closely examining the theoretical periodicity of the corresponding limit cycles. Using a calibration of the US economy, our model is able to reproduce the observed peak range of spectral density at around 8 to 10 years of the cyclical component of gross domestic product, gross private investment, personal consumption expenditures, and of the corresponding price deflator series. Furthermore, such limit cycles are generated under very plausible technological parameters and estimates of the elasticities of intertemporal substitution.
    Keywords: three-sector optimal growth models; mid-term fluctuations; Hopf bifurcation; endogenous cycle; periodicity
    JEL: C62 E32 O41
    Date: 2023–01
  21. By: Attila Gyetvai; Peter Arcidiacono; Arnaud Maurel; Ekaterina Jardim
    Abstract: This paper applies some of the key insights of dynamic discrete choice models to continuoustime job search models.We propose a novel framework that incorporates preference shocks into search models, resulting in a tight connection between value functions and conditional choice probabilities. Including preference shocks allows us to establish constructive identification of all the model parameters. Our method also makes it possible to estimate rich nonstationary job search models in a simple and tractable way, without having to solve any differential equations. We apply our framework to rich longitudinal data from Hungarian administrative records, allowing for nonstationarities in offer arrival rates, wage offers, and in the flow payoff of unemployment. Longer unemployment durations are associated with substantially worse wage offers and lower offer arrival rates, which results in accepted wages falling over time.
    JEL: J64
    Date: 2022
  22. By: Razo-De-Anda, Jorge Omar; Cruz-Aké, Salvador; Venegas-Martínez, Francisco
    Abstract: This paper develops a stochastic dynamic general equilibrium model to assess the impact of Real Estate Investment Trust (REIT) in the growth rate of the real estate sector through direct investment in infrastructure. Based on the theoretical relationships that the model provides we show empirical evidence, through a quantile econometric analysis of time series, of the positive impact of the REITs in the construction sector. The growth in the construction sector comes from the demand for real estate by those trusts, which would lead to a price increase, promoting gross fixed capital formation, and increasing the value of output in the construction industry.
    Keywords: real estate investment trust, real estate markets, financial markets, general equilibrium.
    JEL: G10 G11
    Date: 2022–06–01

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