Essays on Macroeconomic Dynamics
This thesis deals with macroeconomic dynamics. In chapter 1, I study a onesector growth model withendogenous discount rate of the sort proposed by citet{1}. I extendthe model into a heterogeneous agents model with respect to initialwealth, and investigate whether the wealthdistribution may converge to a degenerate distribution.I find that if an agent's decision only depends on his orher reference group and if consumption is more important indiscounting than income around the steady state, then convergence to a degenerate distributionis a unique solution. Furthermore, if an agent's decision depends on averagevariables of overall society, I find that there exists a continuumof steady states.In chapter 2, I introduce three mechanisms into otherwise standard citet{aiya94} model to generate a realisticwealth distribution. The three mechanisms include: i) a wealthdependent shock: labor income shock is wealthdependent;ii) misspecification: people do not take into account the dependence of the labor income process on wealth when they make consumption decisions;iii) statusseeking from some threshold: there is a direct utility gain from being wealthy.The main findings are as follows:i) Wealthdependent labor income shock with misspecification helps to explain wealth concentrationbut cannot fully explain the share of the top 1\% in wealth distribution.ii) In the full model with statusseeking, the share of top 1\% becomes closer to the data.In chapter 3, I build a simple model (twodimensional discrete dynamical system) to study the interactive dynamics of shortterm nominal interest rates of the U.S. and international risk appetite.Main implications from the research are the followings: First, strong interaction between shortterm nominal interest rates of the U.S. and international risk appetite can induce bifurcations of the dynamical system: stable fixed point to limit cycle and then to chaos.Second, a numerical experiment suggests two possible explanations for rising variance ratios: the reduction of random shock and the bifurcation of a dynamical system. This finding hints the potential of complexity measures (such as Lyapunov exponent and permutation entropy) as early warning signals.
Year of publication: 
20100930


Authors:  Lee, Daeyup 
Other Persons:  Marla Ripoll (contributor) ; Jonathan Rubin (contributor) ; James Feigenbaum (contributor) ; John Duffy (contributor) 
Publisher: 
PIT 
Saved in:
freely available
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