Although rational consumers without bequest motives are better oÞ investing exclusively with annuitized instruments in partial equilibrium, we demonstrate the welfare effect of annuitization is ambiguous in general equilibrium on account of the pecuniary externality. Accidental bequests improve...

This paper studies the dynamics of durable and nondurable consumption under two alternative assumptions about information updating by households – rational inattention and sticky expectations. We first show that the two types of sticky information diffusion can help generate strong excess...

In the present paper an empirical analysis will point out that austerity measures due to high levels of government debt as a percentage of GDP have (among others) a positive impact on social unrest measured by the number of strikes. The empirical findings of the present paper support the view of...

In the present paper an empirical analysis will point out that government debt as a percentage of GDP has a negative impact (among others) on banking profitability. This impact will be even worse when this debt as a percentage of GDP exceeds a certain critical level. The sample covers during the...

In this small paper author makes some comments on the relation between Income Distribution and the Government Debt as a percentage of GDP. It is estimated through a panel data model that optimum Income Distribution takes place at a critical level of Government Debt as a percentage of GDP....

We consider the optimality of various institutional arrangements for agencies that conduct macro-prudential regulation and monetary policy. When a central bank is in charge of price and financial stability, a new time inconsistency problem may arise. Ex-ante, the central bank chooses the...

We develop a dynamic stochastic general equilibrium model with financial frictions on both financial intermediaries and goods-producing firms. In this context, due to high leverage of financial intermediaries, balance sheet disruptions in the financial sector are particularly detrimental for...

This paper studies the aggregate dynamics of durable and nondurable consumption under sticky information diffusion (SID) due to noisy observations and slow learning within the permanent income framework. We show that SID can significantly improve the model's predictions on the joint behavior of...

The purpose of this paper is to understand the effects of the elasticity of intertemporal substitution (EIS) and risk aversion on savings separately and determine which coefficient is more important factor for precautionary savings. This is an important question since a significant fraction of...

Moral hazard models with hidden saving decisions are useful to study such diverse problems as unemployment insurance, income taxation, executive compensation, or human capital policies. How can we solve such models? In general, this is very difficult. Under the conditions derived in this paper,...