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Journal Article
Restoring confidence and growth
Siems, Thomas F. (2013)
Financial Insights , Volume 2 , Issue 2 , Pages 1-3

Working Paper
Welfare Evaluation in a Heterogeneous Agent Model: How Representative is the CES Representative Consumer?
Tito, Maria D. (2015-12-02)
The present paper investigates the impact of asymmetric price changes on welfare in a model with heterogeneous consumers. I consider consumer heterogeneity a la Anderson et al. (1992). The standard welfare equivalence between the CES representative consumer and the discrete choice model breaks down in presence of asymmetric price changes. In fact, asymmetric variation in prices produce differential gains among heterogeneous consumers. I show that there exists no feasible Kaldor-Hicks income transfer such that the gains are equally redistributed. Intuitively, in presence of decreasing marginal ...
Finance and Economics Discussion Series , Paper 2015-109

Working Paper
Rationally Inattentive Savers and Monetary Policy Changes: A Laboratory Experiment
Civelli, Andrea; Deck, Cary; Tutino, Antonella (2019-12-19)
We present a model where rationally inattentive agents decide how much to save while imperfectly tracking interest rate changes. Suitable assumptions on agents’ preferences and interest rate distribution allow us to derive testable theoretical predictions and their implications for monetary policy. We probe these predictions using a laboratory experiment with induced inattention that closely reflects the theoretical assumptions. We find that, empirically, the laboratory data corroborates the results of the theoretical model. In particular, we show that experimental subjects respond to ...
Working Papers , Paper 1915

Working Paper
Bundling Time and Goods: Implications for Hours Dispersion
Fang, Lei; Silos, Pedro; Hannusch, Anne (2020-01-01)
We document the large dispersion in hours worked in the cross-section. We account for this fact using a model in which households combine market inputs and time to produce a set of nonmarket activities. To estimate the model, we create a novel data set that pairs market expenditures and time use at the activity level using data from the Consumer Expenditure Survey and the American Time Use Survey, respectively. The estimated model can account for a large fraction of the dispersion of hours worked in the data. The substitutability between market inputs and time within an activity and across a ...
FRB Atlanta Working Paper , Paper 2020-1

Working Paper
Luxuries, Necessities, and the Allocation of Time
Fang, Lei; Hannusch, Anne; Silos, Pedro (2021-12-28)
Households enjoy utility from activities that require a combination of time and goods. We classify activities into two types: luxuries and necessities. Luxuries (necessities) are activities for which time and expenditure shares rise (decline) with income. We develop and estimate a model with nonhomothetic preferences and find that time and goods are substitutable in producing activities. Activities are also substitutable among themselves. Hence, wage and price changes cause large reallocations of time and expenditures across activities. This effect is quantitatively important for welfare ...
FRB Atlanta Working Paper , Paper 2021-28

Working Paper
Continuous Markov equilibria with quasi-geometric discounting
Eyigungor, Burcu; Chatterjee, Satyajit (2014-02-27)
We prove that the standard quasi-geometric discounting model used in dynamic consumer theory and political economics does not possess continuous Markov perfect equilibria (MPE) if there is a strictly positive lower bound on wealth. We also show that, at points of discontinuity, the decision maker strictly prefers lotteries over the next period's assets. We then extend the standard model to have lotteries and establish the existence of an MPE with continuous decision rules. The models with and without lotteries are numerically compared, and it is shown that the model with lotteries behaves ...
Working Papers , Paper 14-6

Working Paper
Rationally Inattentive Consumer: An Experiment
Civelli, Andrea; Deck, Cary; LeBlanc, Justin D.; Tutino, Antonella (2018-11-19)
This paper presents a laboratory experiment that directly tests the theoretical predictions of consumption choices under rational inattention. Subjects are asked to select consumption when income is random. They can optimally decide to reduce uncertainty about income by acquiring signals about it. The informativeness of the signals directly relates to the cognitive effort required to process the information. We find that subjects? behavior is largely in line with the predictions of the theory: 1) Subjects optimally make stochastic consumption choices; 2) They respond to incentives and changes ...
Working Papers , Paper 1813

Working Paper
The Downward Spiral: A Macroeconomic Analysis of the Opioid Crisis
Greenwood, Jeremy; Guner, Nezih; Kopecky, Karen A. (2024-08-27)
There have been more than 700,000 opioid overdose deaths since 2000. To analyze the opioid epidemic, a model is constructed where individuals choose whether to use opioids recreationally, knowing the probabilities of addiction and dying. These odds are functions of recreational opioid usage. The model is fit to estimated Markov chains from the US data that summarize the transitions into and out of opioid addiction as well as to a deadly overdose. The epidemic is broken down into two subperiods: 2000-2010 and 2010-2019. The opioid epidemic's drivers, their impact on employment, and the impact ...
Working Papers , Paper 24-18

Working Paper
Optimal Monetary Policy Under Bounded Rationality
Benchimol, Jonathan; Bounader, Lahcen (2018-01-01)
Optimal monetary policy under discretion, commitment, and optimal simple rules regimes is analyzed through a behavioral New Keynesian model. Flexible price level targeting dominates under discretion; flexible inflation targeting dominates under commitment; and strict price level targeting dominates when using optimal simple rules. Stabilizing properties and bounded rationality-independence generally affect the regime's optimality. The policymaker's knowledge of an agent's myopia is decisive, whereas bounded rationality is not necessarily associated with decreased welfare. Several forms of ...
Globalization Institute Working Papers , Paper 336

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