scholarly journals MANAGING INEQUALITY OVER BUSINESS CYCLES: OPTIMAL POLICIES WITH HETEROGENEOUS AGENTS AND AGGREGATE SHOCKS

2021 ◽  
Author(s):  
François Le Grand ◽  
Xavier Ragot
Keyword(s):  
Business Cycles ◽  
Heterogeneous Agents ◽  
Aggregate Shocks ◽  
Optimal Policies

scholarly journals Inequality, Business Cycles, and Monetary‐Fiscal Policy

Econometrica ◽  
2021 ◽  
Vol 89 (6) ◽  
pp. 2559-2599 ◽  
Author(s):  
Anmol Bhandari ◽  
David Evans ◽  
Mikhail Golosov ◽  
Thomas J. Sargent
Keyword(s):  
Business Cycles ◽  
Incomplete Markets ◽  
New Keynesian ◽  
Fiscal Policies ◽  
Price Stabilization ◽  
Small Noise ◽  
Aggregate Shocks ◽  
Keynesian Model ◽  
Optimal Policies ◽  
Order Of Magnitude

We study optimal monetary and fiscal policies in a New Keynesian model with heterogeneous agents, incomplete markets, and nominal rigidities. Our approach uses small‐noise expansions and Fréchet derivatives to approximate equilibria quickly and efficiently. Responses of optimal policies to aggregate shocks differ qualitatively from what they would be in a corresponding representative agent economy and are an order of magnitude larger. A motive to provide insurance that arises from heterogeneity and incomplete markets outweighs price stabilization motives.

The Cyclical Job Ladder

2018 ◽  
Vol 10 (1) ◽  
pp. 165-188 ◽  
Author(s):  
Giuseppe Moscarini ◽  
Fabien Postel-Vinay
Keyword(s):  
Labor Market ◽  
Business Cycles ◽  
Empirical Evidence ◽  
Economic Activity ◽  
Critical Role ◽  
Search Frictions ◽  
Aggregate Shocks ◽  
Earnings Growth ◽  
Wage Premiums ◽  
Main Engine

Many theories of labor market turnover generate a job ladder. Due to search frictions, workers earn rents from employment. All workers agree on which jobs are, in this sense, more desirable and slowly climb the job ladder through job-to-job quits. Occasionally, negative shocks throw them off the ladder and back into unemployment. We review a recent body of theory and empirical evidence on labor market turnover through the lens of the job ladder. We focus on the critical role that the job ladder plays in transmitting aggregate shocks, through the pace and direction of employment reallocation, to economic activity and wages and in shaping business cycles more generally. The main evidence concerns worker transitions, both through nonemployment and from job to job, between firms of different sizes, ages, productivity levels, and wage premiums, as well as the resulting earnings growth. Poaching by firms up the ladder is the main engine of reallocation, which shuts down in recessions.

THE IMPORTANCE OF SECTORAL AND AGGREGATE SHOCKS IN BUSINESS CYCLES

1991 ◽  
Vol 29 (2) ◽  
pp. 317-335 ◽  
Author(s):  
Stefan C. Norrbin ◽  
Don E. Schlagenhauf
Keyword(s):  
Business Cycles ◽  
Aggregate Shocks

Risk Premium Shocks Can Create Inefficient Recessions

2021 ◽  
Author(s):  
Sebastian Di Tella ◽  
Robert Hall
Keyword(s):  
Business Cycles ◽  
Risk Premium ◽  
Optimal Policy ◽  
Idiosyncratic Risk ◽  
Efficient Allocation ◽  
Price Model ◽  
Aggregate Shocks ◽  
Risk Premiums

Abstract We develop a simple flexible-price model of business cycles driven by spikes in risk premiums. Aggregate shocks increase firms’ uninsurable idiosyncratic risk and raise risk premiums. We show that risk shocks can create quantitatively plausible recessions, with contractions in employment, consumption, and investment. Business cycles are inefficient—output, employment, and consumption fall too much during recessions, compared to the constrained-efficient allocation. Optimal policy involves stimulating employment and consumption during recessions.

scholarly journals Agency business cycles

2020 ◽  
Vol 15 (1) ◽  
pp. 123-158
Author(s):  
Mikhail Golosov ◽  
Guido Menzio
Keyword(s):  
Stochastic Process ◽  
Business Cycles ◽  
Economic Activity ◽  
Aggregate Fluctuations ◽  
Aggregate Shocks ◽  
The Past ◽  
Stochastic Fluctuations ◽  
Ex Ante ◽  
Randomization Process

We develop a theory of endogenous and stochastic fluctuations in economic activity. Individual firms choose to randomize over firing or keeping workers who performed poorly in the past to give them an ex ante incentive to exert effort. Different firms choose to correlate the outcome of their randomization to reduce the probability with which they fire nonperforming workers. Correlated randomization leads to aggregate fluctuations. Aggregate fluctuations are endogenous—they emerge because firms choose to randomize and they choose to randomize in a correlated fashion—and they are stochastic—they are the manifestation of a randomization process. The hallmark of a theory of endogenous and stochastic fluctuations is that the stochastic process for aggregate “shocks” is an equilibrium object.

Peculiarities of Modern Dynamics of the Global Economy

2010 ◽  
pp. 78-92 ◽  
Author(s):  
V. Klinov
Keyword(s):  
Economic Growth ◽  
Economic Development ◽  
Business Cycles ◽  
Global Economy ◽  
Long Waves ◽  
Rapid Expansion ◽  
Business Taxation ◽  
Modern World ◽  
China And India ◽  
World Economic

Rates and factors of modern world economic growth and the consequences of rapid expansion of the economies of China and India are analyzed in the article. Modification of business cycles and long waves of economic development are evaluated. The need of reforming business taxation is demonstrated.

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