1,721,040 research outputs found
Non-market household time and the cost of children
Get PDFA distinguishing feature among households is whether adult members work or not, since the occupational status of adults affects their available time for home activities. Using a survey method in two countries, Belgium and Germany, we provide household incomes that retain the level of well-being across different family types, distinguished by family size and occupational status of adults. Our tests support that childcare-time costs are important determinants of household well-being. Estimates of child costs relative to an adult are higher for households that are time-constrained (all adults in the household work). Moreover, we find supportive evidence for the hypothesis that, in two-adult households, there is a potential for within-household welfare gains from specialization in market- vs. domestic activities, especially childcare. --household production,child costs,childcare,survey method
Essays on Monetary Economics and Asset Pricing
Get PDFThis dissertation consists of three chapters based on three applied theory papers, which all use microfoundations to study mechanisms behind asset prices in the context of monetary policy and financial stability.
Market Fragility and the Paradox of the Recent Stock-Bond Dissonance. The objective of this study is to jointly explain stock prices and bond prices. After the Lehman-Brothers collapse, the stock index has exceeded its pre-Lehman-Brothers peak by 36% in real terms. Seemingly, markets have been demanding more stocks instead of bonds. Yet, instead of observing higher bond rates, paradoxically, bond rates have been persistently negative after the Lehman-Brothers collapse. To explain this paradox, we suggest that, in the post-Lehman-Brothers period, investors changed their perceptions on disasters, thinking that disasters occur once every 30 years on average, instead of disasters occurring once every 60 years. In our asset-pricing calibration exercise, this rise in perceived market fragility alone can explain the drop in both bond rates and price-dividend ratios observed after the Lehman-Brothers collapse, which indicates that markets mostly demanded bonds instead of stocks.
Time-Consistent Welfare-Maximizing Monetary Rules. The objective of this study is to jointly explain capital prices, bond prices and money supply/demand. We analyze monetary policy from the perspective that a Central Bank conducts monetary policy serving the ultimate goal of maximizing social welfare, as dictated by a country's constitution. Given recent empirical findings that many households are hand-to-mouth, we study time-consistent welfare-maximizing monetary-policy rules within a neoclassical framework of a cash-in-advance economy with a liquidity-constrained good. The Central Bank performs open-market operations buying government bonds in order to respond to fiscal shocks and to productivity shocks. We formulate the optimal policy as a dynamic Stackelberg game between the Central Bank and private markets. A key goal of optimal monetary policy is to improve the mixture between liquidity constrained and non-liquidity constrained goods. Optimal monetary responses to fiscal shocks aim at stabilizing aggregate consumption fluctuations, while optimal monetary responses to productivity shocks allow aggregate consumption fluctuations to be more volatile.
Jump Shocks, Endogenous Investment Leverage and Asset Prices: Analytical Results. The objective of this study is to jointly model leveraging and stock prices in an environment with rare stock-market disaster shocks. Financial intermediaries invest in the stock market using household savings. This investment leveraging, and its extent, affects stock price movements and, in turn, stock-price movements affect investment leveraging. If the price mechanism is unable to absorb a rare stock-market disaster, then with leverage ratios of 20 or more, financial intermediaries can go bankrupt. We model the interplay between leverage ratios and stock prices in an environment with rare stock-market disaster shocks. First we introduce dividend shocks that follow a Poisson jump process to an endowment economy with pure exchange between two types of agents: (i) shareholders of financial intermediaries that invest in the stock market ("experts"), and (ii) savers, who deposit their savings to financial intermediaries (households). Under the assumption that the households and the so called "experts" both have logarithmic utility, we obtain a closed-form solution for the endowment economy. This closed-form solution serves as a guide for numerically solving the model with recursive Epstein-Zin preferences in continuous-time settings. In our extension we introduce production based on capital investments, but with adjustment costs for investment changes. Jump shocks directly hit the productive capital stock, but the way they influence stock returns of productive firms passes through the leveraging channel, which is endogenous. The production economy also has endogenous growth, and investment adjustment costs partly influence the model's stability properties. Importantly, risk has an endogenous component due to leveraging, and this endogenous-risk component influences growth opportunities, bridging endogenous cycles with endogenous growth. This chapter is part of a broader project on financial stability. Future extensions will include an evaluation of the Basel II-III regulatory framework in order to assess their effectiveness and their impact on growth performance
Essays on Networks, Information Economics, and Dynamic Games of Populism and Conflict
Get PDFThis thesis focuses on developing tools and models for studying strategic interaction among agents in dynamics games. This dissertation consists of one pure theory paper and two applied theory papers. The first chapter develops a general result in differential games. This is an area for studying strategic interactions when agents are forward-looking and calculate their future strategic interactions. The second and third chapters deal with the problem of strategic interactions under incomplete information, in the context of networks. In the second chapter, the analytical tools for linking up strategic actions with the evolution of a network are developed. The last chapter extends the second chapter by recommending network-manager strategies that can lead to welfare-improving network evolution under incomplete information. The thesis presents the first studies to propose a search and matching mechanism of network friends in an environment of incomplete information, higher-order beliefs, and evolutionary dynamics
Essays on Fiscal Policy and Political Economy
No full textThis thesis consists of three essays concerned with endogenous fiscal policy and its interaction with political economy constraints. The first essay presented in Chapter 2 examines the cyclical behavior of endogenous government consumption over the business cycle absent a commitment mechanism in a neoclassical economy with Total Factor Productivity (TFP) shocks and investment shocks. Tax rates that finance public consumption are chosen in a time consistent way in a dynamic game between the government and a representative agent that values public goods in his utility. It is found that government consumption set without commitment behaves procyclical in response to the mentioned shocks. The government-consumption-output ratio is mildly procyclical or countercyclical depending on the selected calibration. Particularly, the elasticity of substitution between private and public goods plays an important role. The second essay showed in Chapter 3 extends the model studied in Chapter 2 adding agent heterogeneity in wealth and labor productivity. The aim of this study is to identify how policy outcomes are affected by inequality of households, particularly the median voter's choice of tax rates that finance public goods. For a standard RBC calibration to the U.S. economy the result is a strong procyclical comovement of public consumption with output, and a relatively weak procyclical comovement of the output share of public consumption with output, that becomes stronger with rising inequality. The politico-economic channel induces causality from output to lagged tax rates, therefore after a Hicks neutral productivity shock the median voter tries to delay the increase in the tax rate, such that the increment will take place just after the accumulation of more capital. In the case of equal agents the response is to decrease the tax rate in the first year after the shock. Additionally, the model predicts that the size of government consumption decreases with inequality. The last essay in Chapter 4 presents a stylized model of external sovereign debt that incorporates corruption in the form of rent-seeking groups by which the choice to cooperate or non-cooperate in providing public goods, in extracting rents and in issuing debt, is endogenized. More than one rent-seeking group originates a "tragedy of the commons" over fiscal resources that make the borrower economy to show collective fiscal impatience. External creditors envision that impatience and require higher interest rates for buying bonds, exacerbating the problem of high debt. The high level of interest rates decreases the wealth of the country and endangers its ability to repay the debt. We show that bailout plans, defined as temporary loans with lower than market level interest rates, are not effective in such economies
A Paradox of Environmental Awareness Campaigns
Get PDFWe build a workable game of common-property resource extraction under rational Bayesian learning about the renewal prospects of a resource. We uncover the impact of exogenously shifting the prior beliefs of each player on the response functions of others. What we find about the role of environmental conservation campaigns is paradoxical. To the extent that such campaigns instill overly high pessimism about the potential of natural resources to reproduce, they create anti-conservation incentives: anyone having exploitation rights becomes inclined to consume more of the resource earlier, before others overexploit, and before the resource's stock is reduced to lower levels
Strategic Exploitation of a Common-Property Resource Under Rational Learning About its Reproduction
No full textpeer reviewedWe build a workable game of common-property resource extraction under rational Bayesian learning about the reproduction prospects of a resource. We focus on Markov-perfect strategies under truthful revelation of beliefs. For reasonable initial conditions, exogenously shifting the prior beliefs of one player toward more pessimism about the potential of natural resources to reproduce can create anti-conservation incentives. The single player whose beliefs have been shifted toward more pessimism exhibits higher exploitation rate than before. In response, all other players reduce their exploitation rates in order to conserve the resource. However, the overall conservation incentive is weak, making the aggregate exploitation rate higher than before the pessimistic shift in beliefs of that single player. Due to this weakness in strategic conservation responses, if the number of players is relatively small, then in cases with common priors, jointly shifting all players’ beliefs toward more pessimism exacerbates the commons problem
A Paradox of Environmental Awareness Campaigns
Get PDFWe build a workable game of common-property resource extraction under rational Bayesian learning about the renewal prospects of a resource. We uncover the impact of exogenously shifting the prior beliefs of each player on the response functions of others. What we find about the role of environmental conservation campaigns is paradoxical. To the extent that such campaigns instill overly high pessimism about the potential of natural resources to reproduce, they create anti-conservation incentives: anyone having exploitation rights becomes inclined to consume more of the resource earlier, before others overexploit, and before the resource's stock is reduced to lower levels.renewable resources; resource exploitation; non-cooperative dynamic games; Bayesian learning; stochastic games; commons; rational learning; uncertainty; beliefs
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