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on Dynamic General Equilibrium |
| By: | Dennis Bonam; Dorinth van Dijk; Gavin Goy; Bing Zhu |
| Abstract: | We provide new evidence on the international spillover effects of US monetary policy through global commercial real estate (CRE) markets. Using a global VAR-X model that exploits both city- and country-level data, we account for spatial dependencies arising from cross-border investor ownership of CRE. A US quantitative easing shock leads to a persistent rise in CRE prices, both within and outside the US, and an expansion of credit, but mostly in the US. To interpret these findings, we develop an open economy New Keynesian model with CRE markets, which highlights the role of increased domestic demand for foreign CRE as a key transmission channel. Moreover, the model reveals that spillover effects can spill back to the US via trade linkages, amplifying the initial effects of US monetary policy. |
| Keywords: | monetary policy; commercial real estate; international spillovers; quantitative easing; global VAR-X model; New Keynesian model; |
| JEL: | C32 E32 E52 F42 R33 |
| URL: | https://d.repec.org/n?u=RePEc:dnb:dnbwpp:872 |
| By: | Pierlauro Lopez (Federal Reserve Bank of Cleveland); Francisco Vázquez-Grande (Federal Reserve Board); David López-Salido (Banco de España) |
| Abstract: | A simple production economy with nominal price rigidities explains several key asset pricing facts, including the average slopes and cyclicality of equity and interest rate term structures. Nominal rigidities amplify the procyclicality of dividends after negative productivity shocks and generate countercyclical inflation, as sluggish price adjustment leads to a gradual dividend recovery. Consequently, short-duration equities (bonds) have more (less) procyclical payoffs than their long-duration counterparts. Slow-moving consumption habits produce large, countercyclical risk prices, yielding realistic asset valuations. Extending Campbell-Cochrane preferences with both market and home consumption habits allows them to operate in production economies while preserving realistic macroeconomic dynamics. |
| Keywords: | equity and bond yields, Campbell-Cochrane habits, nominal rigidities, macrofinance separation, new Keynesian model |
| JEL: | E43 E44 G12 |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:bde:wpaper:2635e |
| By: | Romain Houssa; Jolan Mohimont |
| Abstract: | This paper develops a dynamic general equilibrium model of the global crude oil market that delivers horizon-dependent price elasticities of oil supply and demand, arising from the gradual adjustment of oil producers and consumers over time. We refer to elasticities beyond the impact horizon as dynamic elasticities. We derive closed-form expressions for the elasticities, which allow us to impose transparent prior restrictions in the empirical analysis and to quantify how dynamic elasticities shape the propagation of structural shocks to oil prices and global real activity. We estimate the model with Bayesian methods using monthly data on industrial production and key oil-market indicators — production, inventories, and prices. Diffuse priors on dynamic elasticities imply elasticity profiles that are essentially flat across horizons. By contrast, informative priors — or an expanded information set including drilling activity under diffuse elasticity priors — yield elasticities that rise with the horizon, increase the contribution of supply shocks to fluctuations in oil prices and real activity, and reduce that of oil-consumption demand shocks. |
| Keywords: | oil market, real business cycle (RBC), Bayesian estimation, dynamic elasticities, oil supply and demand |
| JEL: | C32 C11 E32 Q41 Q43 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_13037 |
| By: | Elisa Giannone; Yuhei Miyauchi; Nuno Paixao; Xinle Pang; Yuta Suzuki |
| Abstract: | How do depopulation and population aging evolve differently across regions within a country, and what are their implications for aggregate economic activity and regional inequality? Using spatially disaggregated data from Japan over the past several decades, we show that rural areas have experienced significantly faster depopulation and aging than urban areas, driven by low fertility and sustained out-migration of young cohorts. Regions undergoing these trends face declining local amenities and rising per-capita public service costs. To study the future evolution and economic consequences of these dynamics, we develop and calibrate a dynamic life-cycle spatial general equilibrium model. The model predicts widening geographic disparities in depopulation, aging, and economic activity in the coming centuries. While subsidies to declining regions can lower regional inequality, they come at the cost of lower aggregate efficiency and higher public service expenditures. |
| JEL: | E62 J11 O18 R12 R13 R23 |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35852 |
| By: | Richard Blundell; Monica Costa-Dias; Graham Mazeine; Costas Meghir; Tom Waters |
| Abstract: | Work experience has been found to be a key determinant of work and wages for educated women, but it seems to play a smaller role for the less educated. For them, welfare, tax credits and family composition matter more, and increasingly so does participation in disability programmes. Here we document how labor supply, wages, health, and disability claims have evolved in the UK over the last three decades, and examine how reforms to tax credits, disability benefits and other welfare programs have changed work incentives over this period. We then introduce these features into an empirical dynamic structural model of life-cycle labor supply, human capital and disability benefit application, in which human capital combines health capital, experience accumulated in work, and education. Estimating the model on a panel of working-age women in the UK, we examine the interactions between experience capital and health capital in driving life-cycle earnings across different education groups. Our results highlight the importance of interactions in the disability benefit, welfare and tax-credit systems for understanding the life cycle pattern of hours, employment, earnings, and disability claims, and for evaluating policy counterfactuals. |
| JEL: | D15 D31 H24 H31 I14 I3 J14 J22 J31 |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35861 |
| By: | Santiago Camara; Lawrence J. Christiano; Husnu Dalgic |
| Abstract: | We investigate the global transmission of US monetary policy shocks. The existing literature finds that a US monetary contraction causes a contraction in economic activity not only in the US but also abroad. This sharply contradicts the traditional Mundell-Fleming view. Much of the existing literature refers to frictions in international financial markets as reasons for the failure of the traditional view. Instead, we argue that trade is key for understanding the transmission of US monetary policy shocks. |
| Keywords: | Monetary policy spillovers, Trade channel, Small open economy DSGE models, Exchange rates. |
| JEL: | E44 E52 F31 F32 F41 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2025_782 |