Showing results 1 to 9 of approximately 9.(refine search)
Financial innovations and macroeconomic volatility
The volatility of US business cycles has declined during the last two decades. During the same period the financial structure of firms has become more volatile. In this paper we develop a model in which financial factors are central for generating economic fluctuations. Innovations in financial markets allow for greater financial flexibility and generate a lower volatility of output together with a higher volatility in the financial structure of firms.
AUTHORS: Jermann, Urban J.; Quadrini, Vincenzo
The costs of losing monetary independence: the case of Mexico
AUTHORS: Quadrini, Vincenzo; Cooley, Thomas F.
Entrepreneurship, saving and social mobility
This paper examines entrepreneurship in order to analyze, first, the degree to which the opportunity to start or own a business affects the household's saving behavior and the implication of this behavior for the distribution of wealth and, second, the relationship between the extent of entrepreneurship in the economy and socioeconomic mobility, that is, the movement of families across wealth classes over time. First, a number of stylized facts based on data from the Panel Study of Income Dynamics (PSID) and the Survey of Consumer Finances (SCF) are outlined. They show relevant differences in asset holdings and wealth mobility between entrepreneurs - economic agents that own a business - and workers. Second, a dynamic general equilibrium model of income and wealth distribution with an explicit entrepreneurial choice is developed. The model is calibrated to match the key features of the data, and it is then used to obtain an estimate of the quantitative importance for capital accumulation and wealth concentration of households that undertake entrepreneurial activities, via their different microeconomic behavior. Through the modeling of the entrepreneurial activities, the model economy developed in this study generates a stationary distribution of wealth with a degree of concentration that accounts for the inequality observed in the U. S. economy. The model also successfully replicates the main patterns of socioeconomic mobility in which entrepreneurs experience higher upward mobility than workers.
AUTHORS: Quadrini, Vincenzo
Updated facts on the U.S. distributions of earnings, income, and wealth
AUTHORS: Rios-Rull, Jose-Victor; Diaz-Gimenez, Javier; Quadrini, Vincenzo; Rodriguez, Santiago Budria
Dimensions of inequality: facts on the U.S. distributions of earnings, income, and wealth
This article describes some facts about financial inequality in the United States that a good theory of inequality must be able to explain. These include the facts that labor earnings, income, and wealth are all unequally distributed among U.S. households, but the distributions are significantly different. Wealth is much more concentrated than the other two. Wealth is positively correlated with earnings and income, but not strongly. The movement of households up and down the economic scale is greater when measured by income than by earnings or wealth. Differences across the three variables remain when the data are disaggregated by age, employment status, educational level, and marital status of the heads of U.S. households. Each of these classifications also has significant differences across households. All the facts are based on data taken from the 1992 Survey of Consumer Finances and the 1984?85 and 1989?90 Panel Study of Income Dynamics.
AUTHORS: Quadrini, Vincenzo; Diaz-Gimenez, Javier; Rios-Rull, Jose-Victor
Understanding the U.S. distribution of wealth
This article describes the current state of economic theory intended to explain the unequal distribution of wealth among U.S. households. The models reviewed are heterogeneous agent versions of standard neoclassical growth models with uninsurable idiosyncratic shocks to earnings. The models endogenously generate differences in asset holdings as a result of the household's desire to smooth consumption while earnings fluctuate. Both of the dominant types of models--dynastic and life cycle models--reproduce the U.S. wealth distribution poorly. The article describes several features recently proposed as additions to the theory based on changes in earnings, including business ownership, higher rates of return on high asset levels, random capital gains, government programs to guarantee a minimum level of consumption, and changes in health and marital status. None of these features has been fully analyzed yet, but they all seem to have potential to move the models in the right direction.
AUTHORS: Rios-Rull, Jose-Victor; Quadrini, Vincenzo
The 2007?2009 crisis was characterized by an unprecedented degree of international synchronization as all major industrialized countries experienced large macroeconomic contractions around the date of Lehman bankruptcy. At the same time countries also experienced large and synchronized tightening of credit conditions. We present a two-country model with financial market frictions where a credit tightening can emerge as a self-fulfilling equilibrium caused by pessimistic but fully rational expectations. As a result of the credit tightening, countries experience large and endogenously synchronized declines in asset prices and economic activity (international recessions). The model suggests that these recessions are more severe if they happen after a prolonged period of credit expansion.
AUTHORS: Perri, Fabrizio; Quadrini, Vincenzo
Financial globalization, inequality, and the raising of public debt
During the last three decades, the stock of government debt has increased in most developed countries. During the same period, we also observe a significant liberalization of international financial markets and an increase in income inequality in several industrialized countries. In this paper we propose a multicountry political economy model with incomplete markets and endogenous government borrowing and show that governments choose higher levels of public debt when financial markets become internationally integrated and inequality increases. We also conduct an empirical analysis using OECD data and find that the predictions of the theoretical model are supported by the empirical results.
AUTHORS: Azzimonti-Renzo, Marina; Quadrini, Vincenzo; Eva de Francisco
Financial frictions in macroeconomic fluctations
The key ideas for adding financial market frictions in general equilibrium models are not new in macroeconomics. However, it is only with the recent crisis that the profession has fully recognized the importance of financial markets for business cycle fluctuations. In this article I review some of the most popular ideas proposed in the literature and I show how the modeling of financial frictions helps us understand several dynamic features of the macroeconomy.
AUTHORS: Quadrini, Vincenzo