Limited asset market participation, income inequality and macroeconomic volatility

Giorgio Motta and Patrizio Tirelli

No 65170975, Working Papers from Lancaster University Management School, Economics Department

Abstract: 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.

Keywords: limited asset market participation; DGSE; determinacy; consumption habits; income inequality; redistribution (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-dge and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://www.lancaster.ac.uk/media/lancaster-univers ... onomicVolatility.pdf (application/pdf)

Related works:
Working Paper: Limited Asset Market Participation, Income Inequality and Macroeconomic Volatility (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:lan:wpaper:65170975

Access Statistics for this paper

More papers in Working Papers from Lancaster University Management School, Economics Department Contact information at EDIRC.
Bibliographic data for series maintained by Giorgio Motta ().