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Working Paper
Monetary Policy over the Life Cycle
Braun, R. Anton; Ikeda, Daisuke (2021-08-20)
A tighter monetary policy is generally associated with higher real interest rates on depositsand loans, weaker performance of equities and real estate, and slower growth in employment andwages. How does a household’s exposure to monetary policy vary with its age? The size andcomposition of both household income and asset portfolios exhibit large variation over the lifecycle inJapanese data. We formulate an overlapping generations model that reproduces these observationsand use it to analyze how household responses to monetary policy shocks vary over the lifecycle. Boththe signs and the ...
FRB Atlanta Working Paper , Paper 2021-20a

Working Paper
Did the 2017 Tax Reform Discriminate against Blue State Voters?
Altig, David E.; Auerbach, Alan J.; Higgins, Patrick C.; Koehler, Darryl; Kotlikoff, Laurence J.; Leiseca, Michael; Terry, Ellie; Ye, Victor (2019-04-01)
The Tax Cut and Jobs Act of 2017 (TCJA) made significant changes to corporate and personal federal income taxation, including limiting the SALT (state and local property, income and sales taxes) deductibility to $10,000. States with high SALT tend to vote Democratic. This paper estimates the differential effect of the TCJA on red- and blue-state taxpayers and investigates the importance of the SALT limitation to this differential. We calculate the effect of permanent implementation of the TCJA on households using The Fiscal Analyzer: a life-cycle, consumption-smoothing program incorporating ...
FRB Atlanta Working Paper , Paper 2019-7

Working Paper
How does liquidity affect consumer payment choice?
Stavins, Joanna (2019-08-01)
We measure consumers? readiness to face emergency expenses. Based on data from a representative survey of US consumers, we find that financial readiness varies widely across consumers, with lowest-income, least-educated, unemployed, and black consumers most likely to have $0 saved for emergency expenses. For these consumers, even a temporary financial shock, either an unexpected negative income shock (such as a layoff or a short-term government shutdown) or an unexpected expenditure (such as a medical expense or a car repair), could have severe financial consequences. The literature likely ...
Working Papers , Paper 19-7

Working Paper
Why Aging Induces Deflation and Secular Stagnation
Braun, R. Anton; Ikeda, Daisuke (2022-09-29)
We provide a quantitative theory of deflation and secular stagnation. In our lifecycle framework, an aging population puts persistent downward pressure on the price level, real interest rates, and output. A novel feature of our theory is that it also recognizes the reactions of government policy. The central bank responds to falling prices by reducing its policy nominal interest rate, and the fiscal authority responds by allowing the public debt–gross domestic product ratio to rise.
FRB Atlanta Working Paper , Paper 2022-12

Working Paper
Payments Evolution from Paper to Electronic: Bill Payments and Purchases
Stavins, Joanna (2021-04-01)
Consumer payments in the United States gradually have been shifting away from paper checks for the past several years. Cash use has declined as well, although at a much slower pace. As the number of check payments has decreased, those payments have been replaced with electronic and card payments. However, the transition from paper to electronic and card payments for bills has not proceeded in the same way as the transition for purchases. Using detailed consumer survey panel data collected over nine years, we track the same respondents over time and find that consumers who reduced their check ...
Working Papers , Paper 21-5

Report
Subjective Intertemporal Substitution
Topa, Giorgio; Tambalotti, Andrea; Eusepi, Stefano; Crump, Richard K. (2015-07-01)
We estimate the elasticity of intertemporal substitution (EIS)—the response of expected consumption growth to changes in the real interest rate—using subjective expectations data from the New York Fed’s Survey of Consumer Expectations (SCE). This unique data set allows us to estimate the consumption Euler equation with no auxiliary assumptions on the properties of expectations, which are instead necessary when using choice data. We ﬁnd a subjective EIS of about 0.5, consistent with the results of much of the literature. In addition, planned consumption displays excess sensitivity to ...
Staff Reports , Paper 734

Working Paper
Student Loans, Access to Credit and Consumer Financial Behavior
Mezza, Alvaro; Ringo, Daniel R.; Sommer, Kamila (2021-08-02)
This paper provides novel evidence that increased student loan debts, caused by rising tuitions, increase borrowersâ€™ demand for additional consumer debt, while simultaneously restricting their ability to access it. The net effect of student loan debt on consumer borrowing varies by market, depending on whether the supply or demand channel dominates. In loosely underwritten credit markets, increased student loan debt causes borrowing to increase, while in tightly underwritten markets, increased student loan debt reduces the use of credit. These findings match predictions of a standard ...
Finance and Economics Discussion Series , Paper 2021-050

Working Paper
Flexible Retirement and Optimal Taxation
Ndiaye, Abdoulaye; Yu, Zhixiu (2025-06-23)
Raising the retirement age is a common policy response when social security schemes face fiscal pressures. We develop and estimate a dynamic life cycle model to study optimal retirement and tax policy when individuals face health shocks and income risk and make endogenous retirement decisions. The model incorporates key features of Social Security, Medicare, income taxation, and savings incentives and distinguishes three channels through which health affects retirement: nonconvexities in labor supply due to health-dependent fixed costs of working, earnings reductions, and mortality risk. We ...
Opportunity and Inclusive Growth Institute Working Papers , Paper 113

Working Paper
Life-Cycle Portfolio Choices and Heterogeneous Stock Market Expectations
Velásquez-Giraldo, Mateo (2024-12-20)
Survey measurements of households’ expectations about U.S. equity returns show substantial heterogeneity and large departures from the historical distribution of actual returns. The average household perceives a lower probability of positive returns and a greater probability of extreme returns than history has exhibited. I build a life-cycle model of saving and portfolio choices that incorporates beliefs estimated to match these survey measurements of expectations. This modification enables the model to greatly reduce a tension in the literature in which models that have aimed to match ...
Finance and Economics Discussion Series , Paper 2024-097

Working Paper
Are Millennials Different?
Vine, Daniel J.; Li, Geng; Kurz, Christopher J. (2018-11-28)
The economic wellbeing of the millennial generation, which entered its working-age years around the time of the 2007-09 recession, has received considerable attention from economists and the popular press. This chapter compares the socioeconomic and demographic characteristics of millennials with those of earlier generations and compares their income, saving, and consumption expenditures. Relative to members of earlier generations, millennials are more racially diverse, more educated, and more likely to have deferred marriage; these comparisons are continuations of longer-run trends in the ...
Finance and Economics Discussion Series , Paper 2018-080

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