Working Papers

  1. Last updated 03/10/2023. “Zoomers and Boomers: Asset Prices and Intergenerational Inequality”, joint with Leland E. Farmer. We construct a perpetual youth DSGE model with aggregate uncertainty in which there are dynamically complete markets and agents have Epstein Zin preferences. We prove that, when endowments have a realistic hump-shaped age-profile, our model has three steady-state equilibria. One of these equilibria is dynamically inefficient and displays real price indeterminacy. We estimate the parameters of our model and we find that a fourth-order approximation around the indeterminate steady-state provides the best fit to U.S. data. In our model, generational inequality is caused by uninsurable income shocks across birth cohorts. SSRN Working Paper.

  2. Last update 1/20/2024 “Monetary and Fiscal Policy when People Have Finite Lives”, Joint with Pawel Zabczyk, of the IMF. The theoretical models that underpin macroeconomic policy analysis typically consist of one or more sets of interacting infinite-horizon agents. In the absence of frictions of any kind and in the presence of commonly maintained simplifying assumptions, these models possess a unique rational expectations equilibrium which is determined by economic fundamentals. This property is critical if comparative statics are to be useful to explain how a given intervention will influence economic outcomes. This paper demonstrates that the uniqueness property does not carry over to economic models with more realistic population demographics. We construct a 62-generation overlapping generations model with production where agents have a hump-shaped labor endowment calibrated to U.S. data and we show that, in our model, both nominal and relative prices are indeterminate. CEPR DP 13432. NBER WP 25445. Matlab Code HERE.

    Some Older Unpublished Papers

  1. Last updated 05/09/2016. The Great Depression . This is a working paper version of material from mybook, Expectations Employment and Prices. It uses a search model of the labor market to provide a micro-founded interpretation of Keynes' explanation of the Great Depression.

  2. Last updated 09/21/2006. A method to generate structural impulse-responses for measuring the effects of shocks in structural macro models. Joint with Andreas Beyer, ECB working paper #586, February 2006. We develop a technique for analyzing the response dynamics of economic variables to structural shocks in linear rational expectations models. 

  3. Last updated 09/05/2006. Shooting the Auctioneer. Joint with Andrew Hollenhorst. This paper uses a relatively standard DSGE model with sticky wages to account for labor market facts. Using a second-order approximation to the policy function we simulate moments of an artificial economy with and without sticky wages. We compute the welfare costs of the sticky wage equilibrium and find them to be small.

  4. On the Indeterminacy of New-Keynesian Economics. Joint with Andreas Beyer, ECB working paper #323. This is an extension of On the Indeterminacy of Determinacy and Indeterminacy American Economic Review, 97(1) 2007, pp. 524-529. It generalizes the argument to a class of three equation linear models. A version of the working paper is published in Macroeconomics Dynamics 12, S1, 2008 pp 60-74 under the title What we Don't Know about The Monetary Transmission Mechanism and why we Don't Know it”.

  5. Business Cycles with Heterogeneous Agents. May 2002. This is part of a project that studies the implications of long-lived stochastic overlapping generations models. The main contribution of the paper is a method for solving these models in closed form. I haven't revised the paper in a while although it is still on my agenda.

  6. Fiscal Policy, Equity Premia and Heterogeneous Agents, May 2002. This paper explores the equity premium puzzle in a long-lived agent model and it argues that market incompleteness can be captured by rapid change in the traders who participate in the equity markets.

  7. Dynasty: A Simple Stochastic Growth Model, August 1990, UCLA department of Economics Working Paper #598. This is the first paper I wrote on DSGE Perpetual Youth stochastic growth models.

Last Updated 11-03-2023