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Creator: Aiyagari, S. Rao. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) Number: 328 Abstract:
One purpose of this article is to exposit the relationship between life cycle models (with constructive immortality) and infinitely lived agents models. We use this to point out problems in interpreting data, especially with regard to the use of interest rates in the class of representative agent models when growth in population and per capita variables is taken into account. We also point out some common misconceptions regarding the "volume of trade" in representative agent models and show how to reconcile the savings profile of the representative agent with the life cycle savings profile in a life cycle model.
Mot-clé: Infinitely lived agents, Volume of trade, Representative agent models, Calibration, and Bequests Assujettir: D91 - Intertemporal choice and growth - Intertemporal consumer choice ; Life cycle models and saving
Creator: Prescott, Edward C. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) Number: 336 La description:
Also published in New approaches to monetary economics : proceedings of the Second International Symposium in Economic Theory and Econometrics / William A. Barnett, Kenneth J. Singleton.
Mot-clé: Agents, Payment processing fees, and Payment methods Assujettir: G20 - Financial Institutions and Services: General
Creator: Persson, Torsten. and Tabellini, Guido Enrico, 1956- Series: Conference on economics and politics Abstract:
Inspired by the current European developments, we study equilibrium fiscal policy under alternative constitutional arrangements in a "federation" of countries. There are two levels of government: local and federal. Local policy redistributes across individuals and affects the probability of aggregate shocks, while federal policy shares international risk. Policies are chosen under majority rule. There is a moral hazard problem: federal risk-sharing can induce the local governments to enact policies that increase local risk. We investigate this incentive problem under alternative fiscal constitutions. In particular, we contrast a vertically ordered system like the EC with a horizontally ordered federal system like the US. These alternative arrangements are not neutral, in the sense that they create different incentives for policymakers and voters, and give rise to different political equilibria. A general conclusion is that, centralization of functions and power can be welfare improving under appropriate institutions. However, this conclusion only applies to the moral hazard problem and a federation where the countries are not too dissimilar.
Mot-clé: Fiscal federalism, Politics, Risk sharing, and Principal—agent models Assujettir: D70 - Analysis of Collective Decision-Making: General, E60 - Macroeconomic policy, macroeconomic aspects of public finance, and general outlook - General, and H10 - Structure and Scope of Government: General
Creator: Jovanovic, Boyan, 1951- and Rob, Rafael. Series: Models of economic growth and development Abstract:
This paper presents a model of growth through technical progress. The nature and scope of what is learned is derived from a set of axioms, and optimal search behavior by agents is then analyzed. Agents can search intensively or extensively. Intensive search explores a technology in greater depth, while extensive search yields new technologies. Agents alternate between these two modes of search. The economy grows forever and the growth rate is bounded away from zero. The growth rate is on average higher during periods of intensive search than during periods of extensive search. Epochs of higher growth are initiated by discoveries that call for further intensive exploration. This mechanism is reminiscent of the process described by Schumpeter as causing long-wave business cycles. Serial correlation properties of output and growth stem from the presence of intensive rather than extensive search. The two key parameters are technological opportunity and the cost of the extensive search.
Assujettir: O30 - Technological change ; Research and development - General and O47 - Economic growth and aggregate productivity - Measurement of economic growth ; Aggregate productivity ; Cross-country output convergence
Creator: Den Haan, Wouter J., 1962- Series: Macroeconomics with heterogenous agents, incomplete markets, liquidity constraints, and transaction costs Abstract:
This paper is part of a project to model the interaction between heterogeneous agents in intertemporal stochastic models and to develop numerical algorithms to solve these kind of models. It is well-known that solving dynamic heterogeneous agent models is a challenging problem, since in these models the distribution of wealth and other characteristics evolve endogenously over time. Existing dynamic models in the literature contain therefore just two agents or other simplifying assumptions to limit the heterogeneity.
Assujettir: D52 - General equilibrium and disequilibrium - Incomplete markets and C63 - Mathematical methods and programming - Computational techniques ; Simulation modeling
Creator: Aiyagari, S. Rao. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) Number: 319 Abstract:
We consider the existence of deterministically cycling steady state equilibria in a class of stationary overlapping generations models with sufficiently long (but, finite) lived agents. Preferences are of the discounted sum of utilities type with a fixed discount rate. Utility functions with large coefficients of relative risk aversion which generate strong income effects (relative to substitution effects) and backward bending offer curves are permitted. Lifetime endowment patterns are quite arbitrary. We show that if agents have a positive discount rate, then as agents1 lifespans get large, short period non-monetary cycles will disappear. Further, constant monetary steady states do not exist and therefore, neither do stationary monetary cycles of any period. We then consider the case where agents have a negative discount rate and show that there are robust examples in which constant monetary steady states as well as stationary monetary cycles (with undiminished amplitude) can occur no matter how long agents live.
Mot-clé: Longevity, Business cycles, Intertemporal choice, and Monetary theory Assujettir: D91 - Intertemporal choice and growth - Intertemporal consumer choice ; Life cycle models and saving and N10 - Macroeconomics and monetary economics ; Growth and fluctuations - General, international, or comparative
Creator: Mulligan, Casey B. Series: Great depressions of the twentieth century Abstract:
I prove some theorems for competitive equilibria in the presence of distortionary taxes and other restraints of trade, and use those theorems to motivate an algorithm for (exactly) computing and empirically evaluating competitive equilibria in dynamic economies. Although its economics is relatively sophisticated, the algorithm is so computationally economical that it can be implemented with a few lines in a spreadsheet. Although a competitive equilibrium models interactions between all sectors, all consumer types, and all time periods, I show how my algorithm permits separate empirical evaluation of these pieces of the model and hence is practical even when very little data is available. For similar reasons, these evaluations are not particularly sensitive to how data is partitioned into "trends" and "cycles." I then compute a real business cycle model with distortionary taxes that fits aggregate U.S. time series for the period 1929-50 and conclude that, if it is to explain aggregate behavior during the period, government policy must have heavily taxed labor income during the Great Depression and lightly taxed it during the war. In other words, the challenge for the competitive equilibrium approach is not so much why output might change over time, but why the marginal product of labor and the marginal value of leisure diverged so much and why that wedge persisted so long. In this sense, explaining aggregate behavior during the period has been reduced to a public finance question - were actual government policies distorting behavior in the same direction and magnitude as government policies in the model?
Mot-clé: Depressions, Taxes, World War 2, and Competitive equilibrium models Assujettir: H30 - Fiscal Policies and Behavior of Economic Agents: General, E32 - Business Fluctuations; Cycles, and C68 - Computable General Equilibrium Models