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This paper develops a simple New Keynesian model incorporating a small time-varying probability that the economy is struck by a disaster in the future. The model's main prediction is that a small increase in the disaster probability causes a recession in the economy, speci cally due to limited...
Persistent link: https://www.econbiz.de/10010318761
Credit spreads are large, volatile and countercyclical, and recent empirical work suggests that risk premia, not expected credit losses, are responsible for these features. Building on the idea that corporate debt, while safe in ordinary recessions, is exposed to economic depressions, this paper...
Persistent link: https://www.econbiz.de/10010292117
Rietz (1988) and Barro (2006) subject consumption and dividends to rare disasters in the growth rate. We extend their … framework and subject consumption and dividends to rare disasters in the growth persistence. We model growth persistence by …
Persistent link: https://www.econbiz.de/10010937967
Rietz (1988) and Barro (2006) subject consumption and dividends to rare disasters in the growth rate. We extend their … framework and subject consumption and dividends to rare disasters in the growth persistence. Wemodel growth persistence by means …
Persistent link: https://www.econbiz.de/10010842914
This paper examines the effects of changes in uncertainty of household income on the macroeconomy. Households face substantial idiosyncratic income risk that is up to two orders of magnitude larger than total factor productivity uncertainty, very persistent and varies substantially over the...
Persistent link: https://www.econbiz.de/10010340551
A news-driven business cycle is a positive comovement of consumption, output, labor, and investment from the news about the future. We show that nominal rigidities, especially sticky prices, can cause it in an estimated medium-scale DSGE economy.
Persistent link: https://www.econbiz.de/10008560485
This paper examines the relationship between cyclical output and inflation in models commonly used for monetary policy analysis. This includes models that incorporate the New Keynesian, Fuhrer-Moore and backward-looking Phillips curves. The main finding is that these models imply a strong...
Persistent link: https://www.econbiz.de/10010322802
We show that the extent of risk-sharing among heterogeneous workers is adeterminant of the degree of monetary non-neutrality in a multisector sticky-price model. Workers are employed in different sectors of the economy and, as a consequence, earn different wages. The inability of workers to...
Persistent link: https://www.econbiz.de/10013194728
This paper examines the relationship between cyclical output and inflation in models commonly used for monetary policy analysis. This includes models that incorporate the New Keynesian, Fuhrer-Moore and backward-looking Phillips curves. The main finding is that these models imply a strong...
Persistent link: https://www.econbiz.de/10005212000
A commonly held view is that nominal rigidities are important for the transmission of monetary policy shocks. We argue that they are also important for understanding the dynamic effects of technology shocks, especially on labor hours, wages, and prices. Based on a dynamic general equilibrium...
Persistent link: https://www.econbiz.de/10005015231