A healthy financial system encourages the efficient allocation of capital and risk. The collapse of the house price bubble led to the financial crisis that started in 2007. There is a large empirical literature concerning the relation between asset price bubbles and financial crises. I evaluate...

We use a welfare-based intertemporal stochastic optimization model and historical data to estimate the size of the optimal intergenerational and liquidity funds and the corresponding resource dividend available to the government of the Canadian province Alberta. To first-order of approximation,...

This paper considers the quantitative role of growth in the size of the social security program in contributing to the collapse of personal saving in the U.S. over the last few decades. Using a calibrated, general equilibrium life-cycle model this paper shows that social security may not be to...

We use sizeable lottery prizes in Norwegian administrative panel data to characterize households' marginal propensities to consume (MPCs). Our main contribution is to document how MPCs vary with household characteristics and prize size, and how lottery prizes are spent and saved over time. We...

We use the Italian Survey of Household Income and Wealth, a rather unique dataset with a long time dimension of panel information on consumption, income and wealth, to structurally estimate a buffer-stock saving model. We exploit the information contained in the joint dynamics of income,...

Unconventional fiscal policy uses announcements of future increases in consumption taxes to generate inflation expectations and accelerate consumption expenditure. It is budget neutral and time consistent. We exploit a unique natural experiment for an empirical test of the effectiveness of...

We analyse optimal saving of risk-averse households when labour income stochastically jumps between two states. The generalized Keynes-Ramsey rule includes a precautionary savings term. A phase diagram analysis illustrates consumption and wealth dynamics within and between states. There is an...

The Pessimists and the Optimists disagree whether the US external deficits and the associated buildup of US net foreign liabilities are problems that require urgent attention. A warning signal should be that the debt ratio deviates significantly from the optimal ratio. The optimal debt ratio or...

Employing a continuous-time real options modeling framework, this paper scrutinizes the incentives to invest in German offshore wind farms. The focus of the analysis is the mode of action of the German feed-in tariff system for offshore wind energy deployment. The numerical results reveal that...

This paper explores the introduction of collective risk-sharing elements in defined contribution pension contracts. We consider status-contingent, age-contingent and asset contingent risk-sharing arrangements. All arrangements raise aggregate welfare, as measured by equivalent variations. While...