Distributional Dynamics

Christian Bayer, Luis Calderon () and Moritz Kuhn ()

CRC TR 224 Discussion Paper Series from University of Bonn and University of Mannheim, Germany

Abstract: We develop a new method for deriving high-frequency synthetic distributions of consumption, income, and wealth. Modern theories of macroeconomic dynamics identify the joint distribution of consumption, income, and wealth as a key determinant of aggregate dynamics. Our novel method allows us to study their distributional dynamics over time. The method can incorporate different microdata sources, regardless of their frequency and coverage of variables, to generate high-frequency synthetic distributional data. We extend existing methods by allowing for more flexible data inputs. The core of the method is to treat the distributional data as a time series of functions whose underlying factor structure follows a state-space model, which we estimate using Bayesian techniques. We show that the novel method provides the high-frequency distributional data needed to understand better the dynamics of consumption and its distribution over the business cycle.

Keywords: Consumption, income, and wealth inequality; Macroeconomic dynamics; Dynamic state-space model; Functional time-series data; Bayesian statistics (search for similar items in EconPapers)
JEL-codes: C32 C55 D31 E21 E32 E37 (search for similar items in EconPapers)
Pages: 65
Date: 2025-01
New Economics Papers: this item is included in nep-ecm
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Working Paper: Distributional Dynamics (2025)
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Persistent link: https://EconPapers.repec.org/RePEc:bon:boncrc:crctr224_2025_625

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