TY - UNPB

T1 - Limited asset market participation, income inequality and macroeconomic volatility

AU - Motta, Giorgio

AU - Tirelli, Patrizio

PY - 2014

Y1 - 2014

N2 - By introducing external consumption habits and Limited Asset Market Participation in an otherwise standard New Keynesian DSGE model we uncover a causality link between limited asset market participation, consumption inequality and macroeconomic volatility. We also obtain that monetary contractions have redistributive effects in favour of asset holders, broadly confirming the findings in Coibion et al. (2012). Finally we analyze the impact of redistributive fiscal policies that target consumption inequality between households groups. Such policies have beneficial implications for macroeconomic stability, bringing the dynamic performance of the model close to the one generated by representative-agent DSGE models.

AB - By introducing external consumption habits and Limited Asset Market Participation in an otherwise standard New Keynesian DSGE model we uncover a causality link between limited asset market participation, consumption inequality and macroeconomic volatility. We also obtain that monetary contractions have redistributive effects in favour of asset holders, broadly confirming the findings in Coibion et al. (2012). Finally we analyze the impact of redistributive fiscal policies that target consumption inequality between households groups. Such policies have beneficial implications for macroeconomic stability, bringing the dynamic performance of the model close to the one generated by representative-agent DSGE models.

KW - limited asset market participation

KW - DGSE

KW - determinacy

KW - consumption habits

KW - income inequality

KW - redistribution

M3 - Working paper

T3 - Economics Working Paper Series

BT - Limited asset market participation, income inequality and macroeconomic volatility

PB - Lancaster University, Department of Economics

CY - Lancaster

ER -