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We develop a method that allows one to compute incomplete-market equilibria routinely for Markovian equilibria (when they exist). The main difficulty to be overcome arises from the set of state variables. There are, of course, exogenous state variables driving the economy but, in an incomplete...
Persistent link: https://www.econbiz.de/10005124234
We measure the amount of income insurance and cross-sectional consumption smoothing (lending and borrowing) achieved within subgroups of states, such as regions or clubs, e.g. the club of rich states. We find that there is as much income insurance between, as well as within, regions. By...
Persistent link: https://www.econbiz.de/10005504778
The paper studies the causes of the current financial crisis and considers proposals for mitigation and prevention of future crises. The crisis is was the product of a ‘perfect storm’ bringing together a number of microeconomic and macroeconomic pathologies. Among the microeconomic systemic...
Persistent link: https://www.econbiz.de/10005791213
This paper develops an analytical framework to study consumption and labour supply in a rich class of heterogeneous-agent economies with partial insurance. The environment allows for trade in non-contingent and state-contingent bonds, for permanent and transitory idiosyncratic productivity...
Persistent link: https://www.econbiz.de/10005114147
government does not buy back old bonds the puzzle disappears and the optimal bond portfolio matches the facts mentioned above …
Persistent link: https://www.econbiz.de/10011096106
In an economy with financial imperfections, Ricardian equivalence holds when prices are flexible and the steady-state distribution of consumption is uniform, or labor is inelastic. With different steady-state consumption levels, Ricardian equivalence fails, but tax cuts, somewhat paradoxically,...
Persistent link: https://www.econbiz.de/10011084445
We use a panel of 16 OECD countries over several decades to investigate the effects of government debts and deficits on long-term interest rates. In simple static specifications, a one-percentage-point increase in the primary deficit relative to GDP increases contemporaneous long-term interest...
Persistent link: https://www.econbiz.de/10005067414
We study economic growth and inflation at different levels of government and external debt. Our analysis is based on … roughly cut in half. Third, there is no apparent contemporaneous link between inflation and public debt levels for the … advanced countries as a group (some countries, such as the United States, have experienced higher inflation when debt/GDP is …
Persistent link: https://www.econbiz.de/10008468655
We develop a dynamic stochastic general equilibrium model to study bank risk and sovereign risk interdependence in the Euro Area. We find that an increase in capital investment risk shock, results in a considerably deeper recession when sovereign risk is also present. This result has three...
Persistent link: https://www.econbiz.de/10011201352
Survey respondents strongly disagree about return risks and, increasingly, macroeconomic uncertainty. This may have contributed to higher asset prices through increased use of collateralisation, which allows risk-neutral investors to realise perceived gains from trade. Investors with lower risk...
Persistent link: https://www.econbiz.de/10011084220