Macroeconomic Policies and Agent Heterogeneity
Defence date: 24 February 2012
Examining Board: Giancarlo Corsetti, Arpad Abraham, Juan Carlos Conesa, Jonathan Heathcote.
This thesis contributes to the understanding of macroeconomic policies’ impact on the distribution of wealth. It belongs to the strand of literature that departs from the representative agent assumption and perceives agent heterogeneity and the induced disparities in wealth accumulation, as an important dimension of economic policy-making. Within such economic environment, this thesis analyses the impact of three macroeconomic policies, namely monetary policy under the form of inflation targeting, fiscal policy under the form of asymmetric transfers, and finally retirement policies by shedding light on how household allocate their financial wealth over the life cycle. The first chapter of this thesis explores whether a higher inflation target induces more households to hold real assets rather than money holdings, thereby leading to a higher aggregate capital stock. It shows that a higher inflation target can lead to welfare improvements, when the economy is parametrized to US data. Such policy shows to be welfare improving, as the higher stock of aggregate capital reduces the real interest rate, which improves the welfare of indebted households. The second chapter of this thesis is joint work with A. Fagereng and L. Guiso. It provides novel empirical evidence on the life cycle patterns of the extensive and the intensive margin of stock market participation over the life-cycle. Also we provide a model that replicates the life cycle patterns of the conditional risky share and the participation rate, by introducing a fixed per period cost friction and a limited trust friction. In the third chapter, co-authored with M. Froemel, we analyse whether asymmetric transfer policies can be a pertinent short run policy instrument to overcome distortions arising from the lack of insurance opportunities for households due to financial market incompleteness. We show that asymmetric transfers can improve welfare, when transfer programs are pro-borrowers rather than lump-sum or pro-lenders.