We present a macroeconomic model calibrated to match both microeconomic and macroeconomic evidence on household income dynamics. When the model is modified in a way that permits it to match empirical measures of wealth inequality in the U.S., we show that its predictions (unlike those of...

We show that using a remapped version of the decision rule for a standard dynamic stochastic optimization problem, where the mapping is defined by asymptotic limits of the rule as uncertainty goes to zero, produces a solution that is both more robust (in the sense that a stable solution emerges...

This paper presents a simple new method for estimating the size of 'wealth effects' on aggregate consumption. The method exploits the well-documented sluggishness of consumption growth (often interpreted as 'habits' in the asset pricing literature) to distinguish between short-run and long-run...

In dynamic optimization problems with multiple continuous state variables and multiple continuous controls, the method of endogenous gridpoints (ENDG) generates an irregular collection of gridpoints for which standard interpolation techniques do not apply, while alternative interpolation methods...

The method of endogenous gridpoints (ENDG) significantly speeds up the solution to dynamic stochastic optimization problems with continuous state and control variables by avoiding repeated computations of expected outcomes while searching for optimal policy functions. While the method has been...

This paper examines how investments in health, through spending on preventive care, affect subsequent spending on medical care among the retired population.Augmenting a traditional dynamic consumption-savings model with two medical care goods, I estimate a structural life cycle model using data...

This paper analyzes various reform options for Japan’s public pension in light of large fiscal consolidation needs of the country. The most attractive option is to increase the pension eligibility age in line with high and rising life expectancy. This would have a positive effect on...

Using a standard, realistically calibrated model of buffer-stock saving with transitory and permanent income shocks, we study how cross-country differences in the wealth distribution and household income dynamics affect the marginal propensity to consume out of transitory shocks (MPC). Across...

In Japan, intergenerational inequality in lifetime resources is substantial, with a heavier fiscal burden on the young than the old. Moreover, given the need for fiscal consolidation, the inequality is even worse than existing policy would suggest. However, this does not mean that fiscal...

Despite the rapid rise in public debt and large fiscal deficits, Japanese Government Bond (JGB) yields have remained fairly stable. Possible factors include: Japan's sizeable pool of household savings, presence of large and stable institutional investors, and strong home bias. These factors are...