Household Income Risk, Nominal Frictions, and Incomplete Markets

Konferenzbeitrag

This paper examines the effects of changes in uncertainty of household income on the macroeconomy. Households face substantial idiosyncratic income risk that is up to two orders of magnitude larger than total factor productivity uncertainty, very persistent and varies substantially over the business cycle. We build a New Keynesian model with heterogeneous agents, where changes in precautionary savings due to time-varying uncertainty depress aggregate activity. With countercyclical markups through sticky prices, increased precautionary savings lower aggregate demand and generate significant output losses as the economy is demand-driven in the short-run. The decline in output is more severe, if the central bank is constrained by the zero lower bound. Our results imply that household income uncertainty may be an important factor in explaining the persistent decline of consumption during the Great Recession.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Beiträge zur Jahrestagung des Vereins für Socialpolitik 2013: Wettbewerbspolitik und Regulierung in einer globalen Wirtschaftsordnung - Session: Uncertainty in Macroeconomics and Asset Pricing ; No. B21-V2

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Macroeconomics: Consumption; Saving; Wealth ; Business Fluctuations; Cycles ; Central Banks and Their Policies

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Lütticke, Ralph ; Bayer, Christian ; Pham, Lien ; Tjaden, Volker
• Ereignis: Veröffentlichung
• (wer): ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften, Leibniz-Informationszentrum Wirtschaft
• (wo): Kiel und Hamburg
• (wann): 2013

Weitere Informationen

• Handle: http://hdl.handle.net/10419/79868
• Letzte Aktualisierung: 10.03.2025, 11:46 MEZ