The Experts below are selected from a list of 312 Experts worldwide ranked by ideXlab platform
Michael Ghil - One of the best experts on this subject based on the ideXlab platform.
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natural disasters impacting a Macroeconomic Model with endogenous dynamics
Ecological Economics, 2008Co-Authors: Stephane Hallegatte, Michael GhilAbstract:We investigate the Macroeconomic response to natural disasters by using an endogenous business cycle (EnBC) Model in which cyclical behavior arises from the investment–profit instability. Our Model exhibits a larger response to natural disasters during expansions than during recessions. This apparently paradoxical result can be traced to the disasters amplifying pre-existing disequilibria during expansions, while the existence of unused resources during recessions damps the exogenous shocks. It thus appears that high-growth periods are also highly vulnerable to supply-side shocks. In our EnBC Model, the average production loss due to a set of disasters distributed at random in time is highly sensitive to the dynamical characteristics of the impacted economy. Larger economic flexibility allows for a more efficient and rapid response to supply-side shocks and reduces production
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natural disasters impacting a Macroeconomic Model with endogenous dynamics
Post-Print, 2008Co-Authors: Stephane Hallegatte, Michael GhilAbstract:We investigate the Macroeconomic response to natural disasters by using an endogenous business cycle (EnBC) Model in which cyclical behavior arises from the investment-profit instability. Our Model exhibits a larger response to natural disasters during expansions than during recessions. This apparently paradoxical result can be traced to the disasters amplifying pre-existing disequilibria during expansions, while the existence of unused resources during recessions damps the exogenous shocks. It thus appears that high-growth periods are also highly vulnerable to supply-side shocks. In our EnBC Model, the average production loss due to a set of disasters distributed at random in time is highly sensitive to the dynamical characteristics of the impacted economy. Larger economic flexibility allows for a more efficient and rapid response to supply-side shocks and reduces production losses. on the other hand, too high a flexibility can lead to vulnerability phases that cause average production losses to soar. These results raise questions about the assessment of climate change damages or natural disaster losses that are based purely on long-term growth Models. (c) 2008 Elsevier B.V. All rights reserved.
Christopher A Sims - One of the best experts on this subject based on the ideXlab platform.
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toward a modern Macroeconomic Model usable for policy analysis
Nber Macroeconomics Annual, 1994Co-Authors: Eric M Leeper, Christopher A SimsAbstract:This paper presents a Macroeconomic Model that is both a completely specified dynamic general equilibrium Model and a probabilistic Model for time series data. We view the Model as a potential competitor to existing ISLM-based Models that continue to be used for actual policy analysis. Our approach is also an alternative to recent efforts to calibrate real business cycle Models. In contrast to these existing Models, the one we present embodies all the following important characteristics: i) It generates a complete multivariate stochastic process Model for the data it aims to explain, and the full specification is used in the maximum likelihood estimation of the Model; ii) It integrates Modeling of nominal variables -- money stock, price level, wage level, and nominal interest rate -- with Modeling real variables; iii) It contains a Keynesian investment function, breaking the tight relationship of the return on investment with the capital-output ratio; iv) It treats both monetary and fiscal policy explicitly; v) It is based on dynamic optimizing behavior of the private agents in the Model. Flexible-price and sticky-price versions of the Model are estimated and their fits are evaluated relative to a naive Model of no-change in the variables and to an unrestricted VAR. The paper displays the Model's implications for the dynamic responses to structural shocks, including policy shocks, and evaluates the relative importance of various shocks for determining economic fluctuations.
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toward a modern Macroeconomic Model usable for policy analysis
Nber Macroeconomics Annual, 1994Co-Authors: Eric M Leeper, Christopher A SimsAbstract:A Macroeconomic Model is presented that is both a completely specified dynamic general equilibrium Model and a probabilistic Model for time series data. We view the Model as a potential competitor to the existing IS/LM-based Model that continues to be used for actual policy analysis. Our approach is also an alternative to recent efforts to calibrate real business cycle Models. In contrast to these existing Models, the one we present embodies all the following important characteristics: (1) It generates a complete multivariate stochastic process Model for the data it aims to explain, and the full specification is used in the maximum likelihood estimation of the Model; (2) it integrates Modeling of nominal variables-money stock, price level, wage level, and nominal interest rate-with Modeling real variables; (3) it contains a Keynesian investment function, breaking the tight relationship of the return on investment with the capital-output ratio; (4) it treats both monetary and fiscal policy explicitly; and ...
Eric M Leeper - One of the best experts on this subject based on the ideXlab platform.
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toward a modern Macroeconomic Model usable for policy analysis
Nber Macroeconomics Annual, 1994Co-Authors: Eric M Leeper, Christopher A SimsAbstract:This paper presents a Macroeconomic Model that is both a completely specified dynamic general equilibrium Model and a probabilistic Model for time series data. We view the Model as a potential competitor to existing ISLM-based Models that continue to be used for actual policy analysis. Our approach is also an alternative to recent efforts to calibrate real business cycle Models. In contrast to these existing Models, the one we present embodies all the following important characteristics: i) It generates a complete multivariate stochastic process Model for the data it aims to explain, and the full specification is used in the maximum likelihood estimation of the Model; ii) It integrates Modeling of nominal variables -- money stock, price level, wage level, and nominal interest rate -- with Modeling real variables; iii) It contains a Keynesian investment function, breaking the tight relationship of the return on investment with the capital-output ratio; iv) It treats both monetary and fiscal policy explicitly; v) It is based on dynamic optimizing behavior of the private agents in the Model. Flexible-price and sticky-price versions of the Model are estimated and their fits are evaluated relative to a naive Model of no-change in the variables and to an unrestricted VAR. The paper displays the Model's implications for the dynamic responses to structural shocks, including policy shocks, and evaluates the relative importance of various shocks for determining economic fluctuations.
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toward a modern Macroeconomic Model usable for policy analysis
Nber Macroeconomics Annual, 1994Co-Authors: Eric M Leeper, Christopher A SimsAbstract:A Macroeconomic Model is presented that is both a completely specified dynamic general equilibrium Model and a probabilistic Model for time series data. We view the Model as a potential competitor to the existing IS/LM-based Model that continues to be used for actual policy analysis. Our approach is also an alternative to recent efforts to calibrate real business cycle Models. In contrast to these existing Models, the one we present embodies all the following important characteristics: (1) It generates a complete multivariate stochastic process Model for the data it aims to explain, and the full specification is used in the maximum likelihood estimation of the Model; (2) it integrates Modeling of nominal variables-money stock, price level, wage level, and nominal interest rate-with Modeling real variables; (3) it contains a Keynesian investment function, breaking the tight relationship of the return on investment with the capital-output ratio; (4) it treats both monetary and fiscal policy explicitly; and ...
Fatih Guvenen - One of the best experts on this subject based on the ideXlab platform.
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a parsimonious Macroeconomic Model for asset pricing
Econometrica, 2009Co-Authors: Fatih GuvenenAbstract:I study asset prices in a two-agent Macroeconomic Model with two key features: limited stock market participation and heterogeneity in the elasticity of intertemporal substitution in consumption (EIS). The Model is consistent with some prominent features of asset prices, such as a high equity premium, relatively smooth interest rates, procyclical stock prices, and countercyclical variation in the equity premium, its volatility, and in the Sharpe ratio. In this Model, the risk-free asset market plays a central role by allowing non-stockholders (with low EIS) to smooth the fluctuations in their labor income. This process concentrates non-stockholders' labor income risk among a small group of stockholders, who then demand a high premium for bearing the aggregate equity risk. Furthermore, this mechanism is consistent with the very small share of aggregate wealth held by non-stockholders in the U.S. data, which has proved problematic for previous Models with limited participation. I show that this large wealth inequality is also important for the Model's ability to generate a countercyclical equity premium. When it comes to business cycle performance, the Model's progress has been more limited: consumption is still too volatile compared to the data, whereas investment is still too smooth. These are important areas for potential improvement in this framework.
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a parsimonious Macroeconomic Model for asset pricing
Staff Report, 2009Co-Authors: Fatih GuvenenAbstract:In this paper, I study asset prices in a two-agent Macroeconomic Model with two key features: limited participation in the stock market and heterogeneity in the elasticity of intertemporal substitution in consumption (EIS). The Model is consistent with some prominent features of asset prices that have been documented in the literature, such as a high equity premium; relatively smooth interest rates; procyclical variation in stock prices; and countercyclical variation in the equity premium, in its volatility, and in the Sharpe ratio. While the Model also reproduces the long-horizon predictability of the equity premium, the extent of predictability is smaller than in the data. In this Model, the risk-free asset market plays a central role by allowing the non-stockholders (who have low EIS) to smooth the fluctuations in their labor income. This process concentrates nonstockholders' aggregate labor income risk among a small group of stockholders, who then demand a high premium for bearing the aggregate equity risk. Furthermore, this mechanism is consistent with the very small share of aggregate wealth held by non-stockholders in the US data, which has proved problematic for previous Models with limited participation. I show that this large wealth inequality is also important for the Model's ability to generate a countercyclical equity premium. Finally, when it comes to business cycle performance the Model's progress has been more limited: consumption is still too volatile compared to the US data, whereas investment is still too smooth. These are important areas for potential improvement in this framework.
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a parsimonious Macroeconomic Model for asset pricing habit formation of cross sectional heterogeneity
The Finance, 2005Co-Authors: Fatih GuvenenAbstract:In this paper we study asset prices in a parsimonious two-agent Macroeconomic Model with two key features: limited participation in the stock market and heterogeneity in the elasticity of intertemporal substitution in consumption. The parameter values for the Model are taken from the business cycle literature, and in particular, are not calibrated to match financial statistics. The Model generates a number of asset pricing phenomena that have been documented in the literature, including a high equity premium and a low risk-free rate; procyclical variation in the price-dividend ratio; countercyclical variation in the equity premium, in its volatility, and in the Sharpe ratio; and long- horizon predictability of returns with high R2 values. We also show that the similarity of our results to those from an external habit Model is not a coincidence: the Model has a reduced form representation that is similar to Campbell and Cochrane’s (1999) framework for asset pricing. However, the implications of the two Models for Macroeconomic questions and policy analyses are different.
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a parsimonious Macroeconomic Model for asset pricing habit formation or cross sectional heterogeneity
2003Co-Authors: Fatih GuvenenAbstract:In this paper we study the asset pricing implications of a parsimonious two-agent Macroeconomic Model with two key features: limited participation in the stock market and heterogeneity in the elasticity of intertemporal substitution. The parameter values for the Model are taken from the real business cycle literature and are not calibrated to match any financial statistic. Yet, with a risk aversion of two, the Model is able to explain a large number of asset pricing phenomena including all the facts matched by the external habit Model of Campbell and Cochrane (1999). Examples in this list include a high equity premium and a low risk-free rate; a counter-cyclical risk premium, volatility and Sharpe ratio; predictable stock returns with coefficients and R 2 values of long-horizon regressions matching their empirical counterparts, among others. In addition the Model generates a risk-free rate with low volatility (5.7 percent annually) and with high persistence. We also show that the similarity of our results to those from an external habit Model is not a coincidence: the Model has a reduced form representation which is extremely similar to Campbell and Cochrane’s framework for asset pricing .H owever, theMacroeconomic implications of the two Models are very different, favoring the limited participation Model. Moreover, we show that policy analysis yields dramatically different conclusions in each framework.
Stephane Hallegatte - One of the best experts on this subject based on the ideXlab platform.
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natural disasters impacting a Macroeconomic Model with endogenous dynamics
Ecological Economics, 2008Co-Authors: Stephane Hallegatte, Michael GhilAbstract:We investigate the Macroeconomic response to natural disasters by using an endogenous business cycle (EnBC) Model in which cyclical behavior arises from the investment–profit instability. Our Model exhibits a larger response to natural disasters during expansions than during recessions. This apparently paradoxical result can be traced to the disasters amplifying pre-existing disequilibria during expansions, while the existence of unused resources during recessions damps the exogenous shocks. It thus appears that high-growth periods are also highly vulnerable to supply-side shocks. In our EnBC Model, the average production loss due to a set of disasters distributed at random in time is highly sensitive to the dynamical characteristics of the impacted economy. Larger economic flexibility allows for a more efficient and rapid response to supply-side shocks and reduces production
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natural disasters impacting a Macroeconomic Model with endogenous dynamics
Post-Print, 2008Co-Authors: Stephane Hallegatte, Michael GhilAbstract:We investigate the Macroeconomic response to natural disasters by using an endogenous business cycle (EnBC) Model in which cyclical behavior arises from the investment-profit instability. Our Model exhibits a larger response to natural disasters during expansions than during recessions. This apparently paradoxical result can be traced to the disasters amplifying pre-existing disequilibria during expansions, while the existence of unused resources during recessions damps the exogenous shocks. It thus appears that high-growth periods are also highly vulnerable to supply-side shocks. In our EnBC Model, the average production loss due to a set of disasters distributed at random in time is highly sensitive to the dynamical characteristics of the impacted economy. Larger economic flexibility allows for a more efficient and rapid response to supply-side shocks and reduces production losses. on the other hand, too high a flexibility can lead to vulnerability phases that cause average production losses to soar. These results raise questions about the assessment of climate change damages or natural disaster losses that are based purely on long-term growth Models. (c) 2008 Elsevier B.V. All rights reserved.
