Creator: Kehoe, Timothy Jerome, 1953-, Kiyotaki, Nobuhiro, and Wright, Randall D. Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 140 Abstract:
We extend the analysis of Kiyotaki and Wright, who study an economy in which the different commodities that serve as media of exchange are determined endogenously. Kiyotaki and Wright consider only symmetric, steady-state, pure-strategy equilibria, and find that for some parameter values no such equilibria exist. We consider mixed-strategy equilibria and dynamic equilibria. We prove that a steady-state equilibrium exists for all parameter values and that the number of steady-state equilibria is generically finite. We also show, however, that there may be a continuum of dynamic equilibria. Further, some dynamic equilibria display cycles.
Keyword: Economic Theory, Commodity Money, and Dynamic Equilibrium
Creator: Kehoe, Timothy Jerome, 1953-, Levine, David K., and Romer, Paul Michael, 1955- Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 118 Abstract:
We consider a production economy with a finite number of heterogeneous, infinitely lived consumers. We show that, if the economy is smooth enough, equilibria are locally unique for almost all endowments. We do so by converting the infinite-dimensional fixed point problem stated in terms of prices and commodities into a finite-dimensional Negishi problem involving individual weights in a social value function. By adding artificial fixed factors to utility and production functions, we can write the equilibrium conditions equating spending and income for each consumer entirely in terms of time-zero factor endowments and derivatives of the social value function.
Creator: Conesa, Juan Carlos, Kehoe, Timothy Jerome, 1953-, Nygaard, Vegard M., and Raveendranathan, Gajendran Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 583 Abstract:
We develop and calibrate an overlapping generations general equilibrium model of the U.S. economy with heterogeneous consumers who face idiosyncratic earnings and health risk to study the implications of exogenous trends in increasing college attainment, decreasing fertility, and increasing longevity between 2005 and 2100. While all three trends contribute to a higher old age dependency ratio, increasing college attainment has different macroeconomic implications because it increases labor productivity. Decreasing fertility and increasing longevity require the government to increase the average labor tax rate from 32.0 to 44.4 percent. Increasing college attainment lowers the required tax increase by 10.1 percentage points. The required tax increase is higher under general equilibrium than in a small open economy with a constant interest rate because the reduction in the interest rate lowers capital income tax revenues.
Keyword: Taxation, Health care, College attainment, Overlapping generations, and Aging Subject (JEL): I13 - Health Insurance, Public and Private, H51 - National Government Expenditures and Health, J11 - Demographic Trends, Macroeconomic Effects, and Forecasts, H55 - Social Security and Public Pensions, and H20 - Taxation, Subsidies, and Revenue: General