Code for: "Idiosyncratic Income Risk and Aggregate Fluctuations"
Principal Investigator(s): View help for Principal Investigator(s) Davide Debortoli, ICREA-UPF, CREi and BSE; Jordi Galí, CREi, UPF and BSE
Version: View help for Version V1
| Name | File Type | Size | Last Modified |
|---|---|---|---|
| ReplicationCode_DG2023 | 10/09/2023 03:48:AM |
Project Citation:
Debortoli, Davide, and Galí, Jordi. Code for: “Idiosyncratic Income Risk and Aggregate Fluctuations.” Nashville, TN: American Economic Association [publisher], 2024. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2024-08-16. https://doi.org/10.3886/E193089V1
Project Description
Summary:
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We study the role of idiosyncratic income risk for aggregate fluctuations
within a simple heterogeneous households framework. We show that the
presence of idiosyncratic income shocks affects the economy's response to an
aggregate shock even in the absence of binding borrowing constraints and/or
cyclical income risk. Their impact can be captured by a
consumption-weighted average of the changes in consumption risk generated by an aggregate 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 idiosyncratic income risk on aggregate
fluctuations is quantitatively small, since most of the changes in
consumption risk are concentrated among poorer (low consumption)
households.
Funding Sources:
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European Research Council (ERC Advanced Grant 882332-HEMPEF);
Spanish Ministry of Economy and Competitiveness (PID2020-116268GB-I00)
Scope of Project
Subject Terms:
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heterogeneous households;
economic fluctuations;
monetary policy
JEL Classification:
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E21 Macroeconomics: Consumption; Saving; Wealth
E32 Business Fluctuations; Cycles
E50 Monetary Policy, Central Banking, and the Supply of Money and Credit: General
E21 Macroeconomics: Consumption; Saving; Wealth
E32 Business Fluctuations; Cycles
E50 Monetary Policy, Central Banking, and the Supply of Money and Credit: General
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