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  1. A case where Barro expectations are not rational
    Author: Schlicht, Ekkehart
    Published: 2012
    Publisher:  Univ., Volkswirtschaftl. Fak., München

    This note generalizes Feldstein's (1976) criticism of Barro's(1974) analysis for the case that the interest rate exceeds the growth rate. This is done by considering an economy in steady state where all agents hold "Barro expectations": they believe... more

    Location:
    ZBW - Leibniz-Informationszentrum Wirtschaft, Standort Kiel
    Signature:
    DS 483 (2012,4)
    Inter-library loan:
    No inter-library loan

    Location:
    Universitätsbibliothek Mannheim
    Inter-library loan:
    No inter-library loan

     

    This note generalizes Feldstein's (1976) criticism of Barro's(1974) analysis for the case that the interest rate exceeds the growth rate. This is done by considering an economy in steady state where all agents hold "Barro expectations": they believe that government debt must necessarily be repaid and therefore leave the present value of their income streams unchanged. In this scenario, a change in the mode of taxation affects the present value of disposable income in the private sector. This violates their Barro expectations.

     
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    Content information
    Source: Union catalogues
    Language: English
    Media type: Book
    Format: Online
    Other identifier:
    hdl: 10419/104385
    Series: Munich discussion paper ; 2012-4
    Subjects: Ricardianische Äquivalenz; Öffentliche Anleihe; Zins; Rationale Erwartung; Steuerpolitik; Steuerwirkung; Erwartungsbildung; Theorie; Barro-Ricardo equivalence; Ricardian equivalence; fiscal policy; debt; taxation; rational expectations
    Scope: Online-Ressource (9 S., 149 KB)
  2. Unexpected consequences of Ricardian expectations
    Author: Schlicht, Ekkehart
    Published: 2012
    Publisher:  Univ., Volkswirtschaftl. Fak., München

    Economists are widely familiar with the Ricardian equivalence thesis. It maintains that, given the time-path of government spending, a change in taxation does not alter the set of feasible life-time consumption plans of the households and affects... more

    Location:
    ZBW - Leibniz-Informationszentrum Wirtschaft, Standort Kiel
    Signature:
    DS 483 (2012,18)
    Inter-library loan:
    No inter-library loan

    Location:
    Universitätsbibliothek Mannheim
    Inter-library loan:
    No inter-library loan

     

    Economists are widely familiar with the Ricardian equivalence thesis. It maintains that, given the time-path of government spending, a change in taxation does not alter the set of feasible life-time consumption plans of the households and affects neither the demand for commodities and services nor the rate of interest, provided the households act rationally. In this note a surprising finding is established. Assuming that the agents in a standard infinite horizon growth model hold the very expectations the thesis proposes ("Ricardian expectations"), it is shown that these expectations are disappointed. This divergence from the Ricardian equivalence thesis is traced to the omission of interest payments on public debt as part of the households' disposable income. The non-equivalence is valid in a wide class of models. Further it is shown that a permanent deficit policy does not imply a violation of the government's budget constraint at any point of time in the future.

     
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    Source: Union catalogues
    Language: English
    Media type: Book
    Format: Online
    Other identifier:
    hdl: 10419/104376
    Series: Munich discussion paper ; 2012-18
    Subjects: Ricardianische Äquivalenz; Erwartungsbildung; Rationale Erwartung; Theorie; Barro-Ricardo equivalence; Ricardian equivalence; fiscal policy; debt; taxation; rational expectations; Ricardian expectations; Barro expectations
    Scope: Online-Ressource (20 S., 168 KB)
  3. The New Keynesian approach to dynamic general equilibrium modeling
    models, methods, and macroeconomic policy evaluation
    Author: Schmidt, Sebastian; Wieland, Volker
    Published: 2012
    Publisher:  Johann Wolfgang Goethe-Univ., Frankfurt am Main

    This chapter aims to provide a hands-on approach to New Keynesian models and their uses for macroeconomic policy analysis. It starts by reviewing the origins of the New Keynesian approach, the key model ingredients and representative models. Building... more

    Location:
    ZBW - Leibniz-Informationszentrum Wirtschaft, Standort Kiel
    Signature:
    DS 464 (52)
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    No inter-library loan

     

    This chapter aims to provide a hands-on approach to New Keynesian models and their uses for macroeconomic policy analysis. It starts by reviewing the origins of the New Keynesian approach, the key model ingredients and representative models. Building blocks of current-generation dynamic stochastic general equilibrium (DSGE) models are discussed in detail. These models address the famous Lucas critique by deriving behavioral equations systematically from the optimizing and forward-looking decision-making of households and firms subject to well-defined constraints. State-of-the-art methods for solving and estimating such models are reviewed and presented in examples. The chapter goes beyond the mere presentation of the most popular benchmark model by providing a framework for model comparison along with a database that includes a wide variety of macroeconomic models. Thus, it offers a convenient approach for comparing new models to available benchmarks and for investigating whether particular policy recommendations are robust to model uncertainty. Such robustness analysis is illustrated by evaluating the performance of simple monetary policy rules across a range of recently-estimated models including some with financial market imperfections and by reviewing recent comparative findings regarding the magnitude of government spending multipliers. The chapter concludes with a discussion of important objectives for on-going and future research using the New Keynesian framework.

     
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    Content information
    Source: Union catalogues
    Language: English
    Media type: Book
    Format: Online
    Other identifier:
    hdl: 10419/97764
    Series: Working paper series / Institute for Monetary and Financial Stability ; 52
    Subjects: Monetary macroeconomics; Keynesian models; New Keynesian models; dynamic stochastic general equilibrium models; New Neoclassical synthesis; model comparison; rational expectations; policy evaluation; policy robustness; monetary and fiscal policy
    Scope: Online-Resource ([4], 107 S.), graph. Darst.