We argue that the U.S. personal saving rate's long stability (from the 1960s through the early 1980s), subsequent steady decline (1980s-2007), and recent substantial increase (2008-2011) can all be interpreted using a parsimonious ‘buffer stock' model of optimal consumption in the presence of...

High household indebtedness could constrain future consumption growth and increase financial stability risks. This paper uses household survey data to analyze both macroeconomic and finanical stability risks from the rapidly rising household debt in China. We find that rising household...

A defining feature of transition economies is the expansion of the private sector. Motivated by the observation that new enterprises in transition economies seem to have a strong preference for recruiting young people, this paper studies intergenerational redistribution following from market...

The paper examines the effects of aid and its volatility on consumption, investment, and the structure of production in the context of an intertemporal two-sector general equilibrium model. A permanent flow of aid finances mainly consumption, a result consistent with the historical failure of...

China's transition to a new growth model continues and the impact has been felt across the globe. Several trends contribute to the 'maturing' of China's economy: i) structural slowing on the convergence path; ii) on-shoring deepening; and iii) demand rebalancing from investment towards...

Deregulation of the financial system often proceeds in tandem with macroeconomic stabilization centered on monetary and other financial targets. This paper presents a model where there may be conflict between these processes. The indicator properties of some financial variables may be rendered...

This paper analyzes the existence of 'wealth effects' derived from net equity (in the form of housing, financial assets, and total net worth) on consumption. The study uses longitudinal household-level data -- from the Panel Study of Income Dynamics (PSID) -- covering about 7,000-9,000...

This paper discusses the evolution of the household debt in Australia and finds that while higher-income and higher-wealth households tend to have higher debt, lower-income households may become more vulnerable to rising debt service over time. Then, the paper analyzes the impact of a monetary...

We study the effects of permanent and temporary income shocks on precautionary saving and investment in a "store-or-sow" model of growth. High volatility of permanent shocks results in high precautionary saving in the safe asset and low investment, or a "volatility trap." Namely, big savers...

We consider the optimality of various institutional arrangements for agencies that conduct macro-prudential regulation and monetary policy. When a central bank is in charge of price and financial stability, a new time inconsistency problem may arise. Ex-ante, the central bank chooses the...