Date and Time: May 17th, 2018, 10:00 am - 12:00 pm
Room: A 101 in the Economics Building (Museum)
This study explores the welfare and distributional effects of fiscal volatility using a neoclassical stochastic growth model with incomplete markets. In our model, households face uninsurable idiosyncratic risks in their labor income and discount factor processes, and we allow aggregate uncertainty to arise from both productivity and government purchase shocks. We calibrate our model to key features of the U.S. economy, before eliminating government purchase shocks. We then evaluate the distributional consequences of the elimination of fiscal volatility and find that, in our baseline case, welfare gains increase with private wealth holdings.
About the speaker
Jinhui Bai is Associate Professor at Washington State University, He received his PhD from Yale University in 2006. His research interests are Macroeconomics, Political Economy and Economic Theory.