Idiosyncratic Income Risk and Aggregate Fluctuations (with J. Galí)
“We study the role of idiosyncratic income shocks for aggregate fluctuations within a simple heterogeneous household framework with no binding borrowing constraints. We show that the presence of idiosyncratic income shocks affects the economy’s response to an aggregate shock in a way that can be captured by a consumption-weighted average of the changes in uncertainty generated by the shock. We apply this framework to two example economies —an endowment economy and a New Keynesian economy— and show that under plausible calibrations the impact of diosyncratic income shocks on aggregate fluctuations is quantitatively small, since most of the changes in uncertainty are concentrated among poorer (low consumption) households.”
Date:
24 May 2022, 13:15 (Tuesday, 5th week, Trinity 2022)
Venue:
Manor Road Building, Manor Road OX1 3UQ
Venue Details:
Seminar Room A or https://zoom.us/j/93987778529
Speaker:
Davide Debortoli (UPF, CREI)
Organising department:
Department of Economics
Part of:
Seminar in Macroeconomics
Booking required?:
Not required
Audience:
Members of the University only
Editor:
Emma Heritage
