| 1. |
- Bask, Mikael, et al.
(författare)
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Optimal monetary policy under learning and structural uncertainty in a New Keynesian model with a cost channel and inflation inertia
- 2016
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Ingår i: Journal of Economic Dynamics and Control. - : Elsevier BV. - 0165-1889 .- 1879-1743. ; 69, s. 112-126
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Tidskriftsartikel (refereegranskat)abstract
- We investigate whether expectations-based optimal monetary policy rules under discretion and under commitment can enforce a determinate and least squares learnable rational expectations equilibrium (REE) in a New Keynesian model with inflation inertia and a cost channel of monetary policy transmission. Our numerical results show that commitment rules can enforce a determinate and learnable REE for all parameter constellations considered, whereas discretionary rules are not always able to enforce the same desirable outcome in the economy. We also examine different types of misapprehensions in policy-making and find that an incorrect assessment of the economy's true structure by the central bank greatly affects its capability to enforce a determinate and learnable, although suboptimal, REE. Thus, our numerical results highlight the relevance of this type of analysis for the design and conduct of monetary policy.
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| 2. |
- Bekiros, Stelios, et al.
(författare)
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Bank capital shocks and countercyclical requirements: Implications for banking stability and welfare
- 2018
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Ingår i: Journal of Economic Dynamics and Control. - : ELSEVIER SCIENCE BV. - 0165-1889 .- 1879-1743. ; 93, s. 315-331
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Tidskriftsartikel (refereegranskat)abstract
- This paper incorporates anticipated and unanticipated shocks to bank capital into a DSGE model with a banking sector. We apply this model to study Basel III countercyclical capital requirements and their implications for banking stability and household welfare. We introduce three different countercyclical capital rules. The first countercyclical capital rule responds to credit to output ratio. The second countercyclical rule reacts to deviations of credit to its steady state, and the third rule reacts to credit growth. The second rule proves to be the most effective tool in dampening credit supply, housing demand and household debt as well as in enhancing the banking stability by ensuring that banks have higher bank capital and capital to asset ratio. After conducting a welfare analysis we find that the second rule outranks the other ones followed by the first rule, the baseline and the third rule respectively in terms of welfare accumulation. (C) 2018 Elsevier B.V. All rights reserved.
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| 3. |
- Boppart, Timo, et al.
(författare)
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Exploiting MIT Shocks in Heterogeneous-Agent Economies : The Impulse Response as a Numerical Derivative
- 2018
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Ingår i: Journal of Economic Dynamics and Control. - : Elsevier BV. - 0165-1889 .- 1879-1743. ; 89, s. 68-92
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Tidskriftsartikel (refereegranskat)abstract
- We propose a new method for computing equilibria in heterogeneous-agent models with aggregate uncertainty. The idea relies on an assumption that linearization offers a good approximation; we share this assumption with existing linearization methods. However, unlike those methods, the approach here does not rely on direct derivation of first-order Taylor terms. It also does not use recursive methods, whereby aggregates and prices would be expressed as linear functions of the state, usually a very high-dimensional object (such as the wealth distribution). Rather, we rely merely on solving nonlinearly for a deterministic transition path: we study the equilibrium response to a single, small “MIT shock” carefully. We then regard this impulse response path as a numerical derivative in sequence space and hence provide our linearized solution directly using this path. The method can easily be extended to the case of many shocks and computation time rises linearly in the number of shocks. We also propose a set of checks on whether linearization is a good approximation. We assert that our method is the simplest and most transparent linearization technique among currently known methods. The key numerical tool required to implement it is value-function iteration, using a very limited set of state variables.
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| 4. |
- Di Corato, Luca
(författare)
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Financing flexibility: The case of outsourcing
- 2017
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Ingår i: Journal of Economic Dynamics and Control. - : Elsevier BV. - 0165-1889. ; 76, s. 35-65
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Tidskriftsartikel (refereegranskat)abstract
- We investigate the relationship between the extent and timing of vertical flexibility and the financial choices of a firm. By vertical flexibility we mean partial/total and reversible outsourcing of a necessary input. A firm simultaneously selects the vertical setting and the financial sources of investment in flexibility, in particular debt and venture capital. A loan may come from a lender that requires the payment of a fixed coupon over time and an option to buy out the firm in certain circumstances. Debt leads to the same level of flexibility of an unlevered firm. Yet investment occurs earlier. The injection of venture capital reduces the quest for vertical flexibility and speeds up investment. Then, there arises a fresh substitutability between a financial (venture capital) and a real variable (vertical flexibility). (C) 2017 Elsevier B.V. All rights reserved.
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| 5. |
- Fang, Dawei, 1983, et al.
(författare)
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How tournament incentives affect asset markets: A comparison between winner-take-all tournaments and elimination contests
- 2017
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Ingår i: Journal of Economic Dynamics and Control. - : Elsevier BV. - 0165-1889. ; 75, s. 1-27
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Tidskriftsartikel (refereegranskat)abstract
- We investigate the impact of investment managers׳ tournament incentives on investment strategies and market efficiency, distinguishing between winner-take-all tournaments (WTA), where a minority wins, and elimination contests (EC), where a majority wins. Theoretically, we show that investment managers play heterogeneous strategies in WTA and homogeneous strategies in EC, and markets are more prone to mispricing in WTA than in EC. Experimentally, we find that investment managers play more heterogeneous strategies in WTA than in EC, but this does not trigger significant differences in prices. Moreover, prices in WTA and EC do not differ significantly from markets composed of linearly incentivized subjects.
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| 6. |
- Fischer, Thomas
(författare)
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Thomas Piketty and the rate of time preference
- 2017
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Ingår i: Journal of Economic Dynamics and Control. - : Elsevier BV. - 0165-1889. ; 77, s. 111-133
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Tidskriftsartikel (refereegranskat)abstract
- Using a standard model in which the individual consumption path is computed solving an optimal control problem, we investigate central claims of Piketty (2014). Rather than r > g (confirmed in the data) r−ρ>g – with ρ being the rate of time preference – matters. If this condition holds and the elasticity of substitution in the production function is larger than one, the capital share converges to one in the long run. Nevertheless, this does not have major impact on the distribution of wealth. The latter, however, converges to maximum inequality for heterogeneous time preferences or rates of interest (either persistent or stochastic). For the latter, the presence of finite life times leads to a distribution with finite wealth inequality featuring fat tails.
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| 7. |
- Hart, Robert
(författare)
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Non-renewable resources in the long run
- 2016
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Ingår i: Journal of Economic Dynamics and Control. - : Elsevier BV. - 0165-1889. ; 71, s. 1-20
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Tidskriftsartikel (refereegranskat)abstract
- We model a competitive economy in which production is dependent on labor and a non-renewable resource, the stock of which is inhomogeneous. We solve the model analytically and show how in infinite time the economy moves away from an initial balanced growth path (b.g.p.) and towards a mature b.g.p. The characteristics of the initial b.g.p. match historical observations of slowly declining resource price and consumption growth tracking global product. The mature b.g.p. depends on the nature of the stock; the more steeply cross-sectional area declines with depth, the faster the rate of price increase. We show how the theoretical model may be adapted and parameterized to explain and predict the evolution of markets for specific resources, applying the model in two cases, copper and petroleum. (C) 2016 Elsevier B.V. All rights reserved.
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| 8. |
- Lundberg, Liv, 1987, et al.
(författare)
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A cobweb model of land-use competition between food and bioenergy crops
- 2015
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Ingår i: Journal of Economic Dynamics and Control. - : Elsevier BV. - 0165-1889. ; 53, s. 1-14
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Tidskriftsartikel (refereegranskat)abstract
- We present a model of interacting cobweb markets and apply it to land-use competition between food and bioenergy crops. In our model the markets are interlinked on the supply side by the limited availability of land. Therefore, instabilities are transferred between the markets and we find that bioenergy demand affects food price volatility. The agents in the model have heterogeneous production capacities, representing variation in global land quality. When we allow agents to choose price predictor, we find that a more sophisticated (but costly) predictor is concentrated to some key parcels of land, which enables the system to reduce instability significantly. The system can also be brought closer to a stable state by introducing costs for changing production type, but it may then be shifted away from the optimum situation predicted by the corresponding equilibrium model.
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| 9. |
- Wallenius, Johanna, et al.
(författare)
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Health, longevity and retirement reform
- 2019
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Ingår i: Journal of Economic Dynamics and Control. - : Elsevier: 24 months. - 0165-1889. ; 103, s. 123-157
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Tidskriftsartikel (refereegranskat)abstract
- In this paper, we study alternative retirement reforms designed to achieve fiscal sustainability in the face of demographic change. We are particularly interested in the heterogeneous effects across demographic groups, as improvements in health and longevity have not been uniform across the population. To this end, we develop a dynamic, structural life cycle model of heterogeneous agents who face health, mortality and income risk. We consider the following policy reform measures: (1) increasing the early access age to old-age retirement, (2) raising income taxes, (3) lowering old-age retirement benefits and (4) lowering old-age retirement and disability benefits. We find that, of the considered policies, proportionally lowering old-age retirement and disability benefits results in the highest average welfare for all education categories. It is also the most successful at boosting employment.
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