Shocks, Frictions, and Inequality in US Business Cycles (joint work with Christian Bayer and Ralph Luetticke)
In how far does inequality matter for the business cycle and vice versa? Using a Bayesian likelihood approach, we estimate a heterogeneous-agent New-Keynesian (HANK) model with incomplete markets and portfolio choice between liquid and illiquid assets. The model enlarges the set of shocks and frictions in Smets and Wouters (2007) by allowing for shocks to income risk and portfolio liquidity. We nd income risk to be an important driver of output and consumption. This makes US recessions more demand driven relative to the otherwise identical complete markets benchmark (RANK). The HANK model further implies that business cycle shocks and policy responses have signicantly contributed to the evolution of US wealth and income inequality.

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Link to paper: www.benjaminborn.de/files/BBL_2019.pdf
Date: 5 December 2019, 13:00 (Thursday, 8th week, Michaelmas 2019)
Venue: Manor Road Building, Manor Road OX1 3UQ
Venue Details: Seminar Room C
Speaker: Benjamin Born (Frankfurt School of Finance & Management)
Organising department: Department of Economics
Part of: Department of Economics Seminar
Booking required?: Not required
Audience: Members of the University only
Editor: Melis Clark