What shapes the optimal degree of progressivity of the tax and transfer system? On the one hand, a progressive tax system can counteract inequality in initial conditions and substitute for imperfect private insurance against idiosyncratic earnings risk. At the same time, progressivity reduces...

This paper develops a theoretical model to analyse how a General Purpose Technology (GPT) shapes within-group wage inequality when workers are ex-ante equal, but their adaptability to new technologies is subject to stochastic factors that are history dependent. It is argued that the diffusion of...

Vector autoregressions (VARs) are flexible time series models that can capture complex dynamic interrelationships among macroeconomic variables. However, their dense parameterization leads to unstable inference and inaccurate out-of-sample forecasts, particularly for models with many variables....

This paper uses a data-set including time series data on macroeconomic variables, loans, deposits and interest rates for the euro area in order to study the features of financial intermediation over the business cycle. We find that stylized facts for aggregate monetary and real variables are...

This paper shows that the explanation of the decline in the volatility of GDP growth since the mid-eighties is not the decline in the volatility of exogenous shocks but rather a change in their propagation mechanism.

This paper studies the joint dynamics of US output and unemployment rates in a nonlinear VAR model. The nonlinearity is introduced through a feedback variable that endogenously augments the output lags of the VAR in recessionary phases. Sufficient conditions for the ergodicity of the model,...