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This paper examines the robustness of the Kiyotaki-Moore collateral amplification mechanism to the existence of complete markets for aggregate risk. We show that, when borrowers can hedge against aggregate shocks at fair prices, the volatility of endogenous variables becomes identical to the...
Persistent link: https://www.econbiz.de/10011605761
This paper examines the robustness of the Kiyotaki-Moore collateral amplification mechanism to the existence of complete markets for aggregate risk. We show that, when borrowers can hedge against aggregate shocks at fair prices, the volatility of endogenous variables becomes identical to the...
Persistent link: https://www.econbiz.de/10013049849
Structural models are a powerful tool for business cycle and monetary policy analysis because they are invariant to either policy changes or external shocks. In this paper, we derive a Sidrauski-type model in which both the demand and supply side are structural in the sense that the behavioral...
Persistent link: https://www.econbiz.de/10011604095
A number of authors have attempted to test whether the U.S. economy is in a determinate or an indeterminate equilibrium. We argue that to answer this question, one must impose a priori restrictions on lag length that cannot be tested. We provide examples of two economic models. Model 1 displays...
Persistent link: https://www.econbiz.de/10011604323
We study identiÞcation in a class of three-equation monetary models. We argue that these models are typically not identiÞed. For any given exactly identiÞed model, we provide an algorithm that generates a class of equivalent models that have the same reduced form. We use our algorithm to...
Persistent link: https://www.econbiz.de/10011604369
We develop a technique for analyzing the response dynamics of economic variables to structural shocks in linear rational expectations models. Our work differs fromstandard SVARs since we allow expectations of future variables to enter structural equations. We show how to estimate the...
Persistent link: https://www.econbiz.de/10011604632
We develop a technique for analyzing the response dynamics of economic variables to structural shocks in linear rational expectations models. Our work differs from standard SVARs since we allow expectations of future variables to enter structural equations. We show how to estimate the...
Persistent link: https://www.econbiz.de/10013318029
Since the advent of Heterogeneous Agent New Keynesian (HANK) models, countercyclical unemployment risk has been deemed an important amplification mechanism for business cycles shocks. Yet, the aggregate effects of such "unemployment fears" are hard to pin down. We thus revisit this issue in the...
Persistent link: https://www.econbiz.de/10015199489
Using detailed micro-data, this paper documents that households with lower income risk (and higher income levels) exhibit a higher Marginal Propensity to Consume (MPC) in response to transitory income shocks, all else being equal. This finding is particularly significant among unconstrained...
Persistent link: https://www.econbiz.de/10014543623
Persistent link: https://www.econbiz.de/10011604308