This paper investigates public pension funding using a dynamic general equilibrium macroeconomic model (DSGE) that facilitates investigation of distortionary effects of fiscal and pension policy responses to ageing. The model is calibrated to the Finnish economy, which will encounter substantial...

We suggest a complementary tool for financial stability analysis based on stochastic simulation of a dynamic stochastic general equilibrium model (DSGE) of the macro economy. The paper relates to financial stability research in which financial aggregates crucial to financial stability are...

This paper extends Gertler’s (1999) tractable overlapping generations model with life-cycle features by allowing for distortionary taxation, demographic transition and stochastic variation in demographic structure. The model is then used to study demographic change in the small open economy of...

This paper presents a two-sector, two-country model showing that inflation in the housing market, a low personal savings rate, and a construction investment boom can contribute to a large current account deficit. In the model, demand by a group of households in the domestic country is...

What is the impact of surprise and anticipated policy changes when agents form expectations using adaptive learning rather than rational expectations? We examine this issue using the standard stochastic real business cycle model with lump-sum taxes. Agents combine knowledge about future policy...

Using the standard real business cycle model with lump-sum taxes, we analyze the impact of fiscal policy when agents form expectations using adaptive learning rather than rational expectations (RE). The output multipliers for government purchases are significantly higher under learning, and fall...

Many indicators of business and growth cycles have been constructed by both private and public agencies and are now in use as monitoring devices of economic conditions and for forecasting purposes. As these indicators are largely composite constructs using other economic data, their frequency...

This paper shows that the Ricardian Equivalence proposition can continue to hold when expectations are not rational and are instead formed using adaptive learning rules. In temporary equilibrium, with given expectations, Ricardian Equivalence holds under the standard conditions for its validity...

This paper derives and estimates an aggregate Euler consumption equation which allows one to compare the importance of collateral constraints and non-separability of consumption and leisure as alternative sources of excess sensitivity of consumption to current income. Estimation results suggest...

We study the effects of aging population on the sustainability of fiscal policy in overlapping generations models with government debt and a pay-as-you-go pension system. The smaller the population growth rate, the lower the maximum sustainable level of deficits. When the utility function is of...