; ; ; "ActiveFedora::Aggregation::ListSource" . a , ; "Wealth and Volatility"; ; "batchuser@example.com"; "Heathcote, Jonathan", "Perri, Fabrizio"; "Federal Reserve Bank of Minneapolis"; "Precautionary saving", "Business cycles", "Aggregate demand", "Multiple equilibria", "Self-fulfilling crises", "Zero lower bound"; "E21 - Macroeconomics: Consumption; Saving; Wealth", "E12 - General Aggregative Models: Keynes; Keynesian; Post-Keynesian", "E52 - Monetary Policy"; "Between 2007 and 2013, U.S. households experienced a large and persistent decline in net worth. The objective of this paper is to study the business cycle implications of such a decline. We first develop a tractable monetary model in which households face idiosyncratic unemployment risk that they can partially self-insure using savings. A low level of liquid household wealth opens the door to self-fullfilling fluctuations: if wealth-poor households expect high unemployment, they have a strong precautionary incentive to cut spending, which can make the expectation of high unemployment a reality. Monetary policy, because of the zero lower bound, cannot rule out such expectations-driven recessions. In contrast, when wealth is sufficiently high, an aggressive monetary policy can keep the economy at full employment. Finally, we document that during the U.S. Great Recession wealth-poor households increased saving more sharply than richer households, pointing towards the importance of the precautionary channel over this period."^^; "2017-09-27"; "2019-05-17T14:18:54.317164326+00:00"^^; "https://doi.org/10.21034/sr.508"; ; "https://creativecommons.org/licenses/by-nc/4.0/"; "Thu Nov 7 21:16:35 2019"; "https://creativecommons.org/licenses/by-nc/4.0/"; "Research Paper"; "601", "323"; "Staff report (Federal Reserve Bank of Minneapolis. Research Department)"; "508"; "Precautionary saving", "Multiple equilibria", "Self-fulfilling crises", "Zero lower bound", "Business cycles", "Aggregate demand"; ; ; ; ; "Federal Reserve Bank of Minneapolis. Research Department"; "Published in: _Review of Economic Studies_ (Vol. 85, No. 4, October 2018, pp. 2173-2213) https://doi.org/10.1093/restud/rdx074."^^; ; "Publication" . ; .