We explore how members of a collective pension scheme can share inflation risks in the absence of suitable financial market instruments. Using intergenerational risk sharing arrangements, risks can be allocated better across the various participants of a collective pension scheme than would be...

When the financial positions of pension funds worsen, regulations prescribe that pension funds reduce the gap between their assets (invested contributions) and their liabilities (accumulated pension promises). This paper quantifies the business cycle effects and distributional implications of...

This paper investigates the age-dependency of participation andunemployment by integrating job search with intertemporal optimizing behaviorof finitely-lived households. We find that search frictions and tax ratesdistort the decisions of older workers to a much larger extent than that ofyoung...

We extend the canonical income process with persistent and transitory risk to shock distributions with left-skewness and excess kurtosis, to which we refer as higher-order risk. We estimate our extended income process by GMM for household data from the United States. We find countercyclical...

We develop a novel argument why better public information can help countries to insure against idiosyncratic risk. Representative agents of developing and industrial countries receive public and private signals on their future income realization and engage in risk-sharing contracts with limited...

Motivated by the apparent failure of the credit multiplier mechanism (CM) to deliver amplification in DSGE models, we re-examine its role in business cycles to address the question: is something wrong with the CM? Our answer is no. In coming to this answer we construct a model with reproducible...

This paper examines the optimal allocation of risk across generations whose savings mix is subject to illiquidity in the form of uncertain trading costs. We use a stylized two-period OLG framework, where each generation makes a portfolio allocation decision for retirement, and show that...

House-purchasing decisions and the possibility of existing homeowners to tap into their housing equity depend decisively on prevailing loan-to-value (LTV) ratios in mortgage markets with borrowing constrained households. Utilizing a smooth transition local projection (STLP) approach, I show that...