A dynamic new Keynesian life-cycle model

Societal aging, demographics, and monetary policy

Research output: Contribution to journalArticle

6 Citations (Scopus)

Abstract

In this paper, we first construct a dynamic new Keynesian model that incorporates life-cycle behavior a la Gertler [1999. Government debt and social security in a life-cycle economy. Carnegie-Rochester Conference Series on Public Policy 50, 61-110], in order to study whether structural shocks to the economy have asymmetric effects on heterogeneous agents, namely workers and retirees. We also examine whether considerations of life-cycle and demographic structure alter the dynamic properties of the monetary business cycle model, specifically the degree of amplification in impulse responses. According to our simulation results, shocks indeed have asymmetric impacts on different households and the demographic structure does alter the size of responses against shocks by changing the trade-off between substitution and income effects.

Original languageEnglish
Pages (from-to)2398-2427
Number of pages30
JournalJournal of Economic Dynamics and Control
Volume32
Issue number8
DOIs
Publication statusPublished - 2008 Aug
Externally publishedYes

Fingerprint

Monetary Policy
Life Cycle
Life cycle
Shock
Aging of materials
Heterogeneous Agents
Public Policy
Business Cycles
Dynamic Properties
Impulse Response
Impulse response
Amplification
Substitution
Substitution reactions
Trade-offs
Model
Series
Demographics
New Keynesian
Monetary policy

Keywords

  • Heterogenous agents
  • Life-cycle
  • New Keynesian model

ASJC Scopus subject areas

  • Economics and Econometrics
  • Control and Optimization

Cite this

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abstract = "In this paper, we first construct a dynamic new Keynesian model that incorporates life-cycle behavior a la Gertler [1999. Government debt and social security in a life-cycle economy. Carnegie-Rochester Conference Series on Public Policy 50, 61-110], in order to study whether structural shocks to the economy have asymmetric effects on heterogeneous agents, namely workers and retirees. We also examine whether considerations of life-cycle and demographic structure alter the dynamic properties of the monetary business cycle model, specifically the degree of amplification in impulse responses. According to our simulation results, shocks indeed have asymmetric impacts on different households and the demographic structure does alter the size of responses against shocks by changing the trade-off between substitution and income effects.",
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AB - In this paper, we first construct a dynamic new Keynesian model that incorporates life-cycle behavior a la Gertler [1999. Government debt and social security in a life-cycle economy. Carnegie-Rochester Conference Series on Public Policy 50, 61-110], in order to study whether structural shocks to the economy have asymmetric effects on heterogeneous agents, namely workers and retirees. We also examine whether considerations of life-cycle and demographic structure alter the dynamic properties of the monetary business cycle model, specifically the degree of amplification in impulse responses. According to our simulation results, shocks indeed have asymmetric impacts on different households and the demographic structure does alter the size of responses against shocks by changing the trade-off between substitution and income effects.

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