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Idiosyncratic Shocks (idiosyncratic + shock)
Selected AbstractsLiquidity Constrained Markets Versus Debt Constrained MarketsECONOMETRICA, Issue 3 2001Timothy J. Kehoe This paper compares two different models in a common environment. The first model has liquidity constraints in that consumers save a single asset that they cannot sell short. The second model has debt constraints in that consumers cannot borrow so much that they would want to default, but is otherwise a standard complete markets model. Both models share the features that individuals are unable to completely insure against idiosyncratic shocks and that interest rates are lower than subjective discount rates. In a stochastic environment, the two models have quite different dynamic properties, with the debt constrained model exhibiting simple stochastic steady states, while the liquidity constrained model has greater persistence of shocks. [source] Poverty Traps and Human Capital AccumulationECONOMICA, Issue 270 2001Carlotta Berti Ceroni In this paper I show that persistent inequality in the distribution of human capital and a negative relation between initial inequality and steady-state aggregate output may follow from the fact that the poor require relatively higher returns to increase expenditure on education. Moreover, I show that poverty traps emerging in models where individual transitions do not depend on aggregate dynamics, though not robust to the introduction of idiosyncratic uncertainty, may still be relevant observationally, if idiosyncratic shocks occur with low probability. In this context, I also analyse the implications of introducing a public education system. [source] A common model approach to macroeconomics: using panel data to reduce sampling errorJOURNAL OF FORECASTING, Issue 3 2005William T. Gavin Abstract Is there a common model inherent in macroeconomic data? Macroeconomic theory suggests that market economies of various nations should share many similar dynamic patterns; as a result, individual country empirical models, for a wide variety of countries, often include the same variables. Yet, empirical studies often find important roles for idiosyncratic shocks in the differing macroeconomic performance of countries. We use forecasting criteria to examine the macrodynamic behaviour of 15 OECD countries in terms of a small set of familiar, widely used core economic variables, omitting country-specific shocks. We find this small set of variables and a simple VAR ,common model' strongly support the hypothesis that many industrialized nations have similar macroeconomic dynamics. Copyright © 2005 John Wiley & Sons, Ltd. [source] Household Debt and Income Inequality, 1963,2003JOURNAL OF MONEY, CREDIT AND BANKING, Issue 5 2008MATTEO IACOVIELLO income inequality; household debt; credit constraints; incomplete markets I construct an economy with heterogeneous agents that mimics the time-series behavior of the earnings distribution in the United States from 1963 to 2003. Agents face aggregate and idiosyncratic shocks and accumulate real and financial assets. I estimate the shocks that drive the model using data on income inequality, aggregate income, and measures of financial liberalization. I show how the model economy can replicate two empirical facts: the trend and cyclical behavior of household debt and the diverging patterns in consumption and wealth inequality over time. While business cycle fluctuations can account for the short-run changes in household debt, its prolonged rise of the 1980s and the 1990s can be quantitatively explained only by the concurrent increase in income inequality. [source] | ||||||||||