This paper discusses a series of Monte Carlo experiments designed to evaluate the empirical properties of Heterogeneous-Agent macroeconomic models in the presence of sampling variability. The calibration procedure leads to the welfare analysis being conducted with the wrong parameters. The...

To what extent is public debt private liquidity? Much policy advice given in the aftermath of the financial crisis rests on the assumption that increasing public debt relaxes borrowing constraints of private households. This is the case for ad-hoc debt limits, which are exogenous to public...

This paper studies the long-run aggregate and welfare effects of eliminating Social Security in a quantitative dynamic general equilibrium life-cycle model where parents and their children are linked by voluntary and accidental bequests. Social Security in this model with impure altruism has a...

Starting slowly with the 1996 Welfare Reform Act and culminating in the 2010 Affordable Care Act, means-tested public health insurance eligibility expanded to include adults in low-income families regardless of their asset holdings. This paper quantifies the effects of these eligibility...

This paper presents a numerical method for solving stochastic general equilibrium models with dynamic portfolio choice. The method can be applied to models with heterogeneous agents, time-varying investment opportunity sets, and incomplete asset markets. We illustrate the method using a...

We present a heterogeneous agents New-Keynesian model subject to a cost channel of monetary policy transmission. Constant turnover between long-time traders and newcomers in market activities, combined with restricted trading opportunities, introduces a feedback from the stock market to real...

The global financial crisis has reaffirmed the importance of financial factors for macroeconomic fluctuations. Recent work has shown how the conventional pre-crisis prescription that monetary policy should pay no attention to financial variables over and above their effects on inflation may no...

I describe a tractable way to study macroeconomic quantities and asset prices in a large class of dynamic stochastic general equilibrium models. The proposed approximate solution is analytical, log-linear, and adjusted for risk. Therefore, it is well suited to investigate economic mechanisms,...

Empirical literature documents that unexpected changes in the nominal interest rates have a significant effect on real stock prices: a 100-basis point increase in the nominal interest rate is associated with an immediate decrease in broad real stock indices that may range from 2.2 to 9%,...

The increase in the price of gold between 2002 and 2011 appears to be a candidate for a potential asset price ‘bubble’, suggesting that chartists (feedback traders) were highly active in the gold market during this period. Hence, this paper develops and tests empirically several models...