2014年1月13日月曜日
Complete vs. Incomplete Market (2)
Baxter, M. and M. J. Crucini. 1995. "Business Cycles and the Asset Structure of Foreign-Trade." International Economic Review
International correlation puzzles for consumption and output
---<quote>---
As discussed by Backus, Kehoe, and Kydland (1992) and Baxter and Crucini (1993), the complete markets economy does reasonably well in matching thewithin-country stylized facts concerning volatility and persistence of macro aggregates. Much more problematic are the complete markets model's implications for cross-country correlations of output, consumption, investment, and labor input. Specifically, this model has difficulty generating positive output comovement (and correspondingly positive comovement of investments and labor inputs across countries). Further, the model predicts a level of cross-country consumption correlationthat is much too high relative to the data.
Because individuals are subject to idiosyncratic (nation-specific) risk in the bond economy, in equilibrium this economy will display nation-specific fluctuations in consumption. Thus we expect that the international correlation between consumptionsshould be lower in the bond economy, and it is-but not much lower.
Similarly, we expect the absence of insurance against labor income risk in the bond economy to alter the response of labor input to productivity shocks. In the complete markets economy, the response to a positive productivity shock in one country generates an increase in labor input in the productive country, and a tendency for a decline in labor input in the relatively unproductive country. Because of the optimal insurance character of the complete markets equilibrium, workers in the productive country agree to "share" some of the additional output generated by the increase in productivity and labor input, in exchange for similar "sharing"when the other country receives a positive productivity shock. In the bond economy, individuals can only smooth consumption across time (by buying or selling bonds); they cannot smooth consumption across different "states of nature" because of the absence of contingent securities. This reduces the tendency for labor input to decline in the temporarily unproductive location.
---<unquote>---
International correlation puzzles for consumption and output
---<quote>---
As discussed by Backus, Kehoe, and Kydland (1992) and Baxter and Crucini (1993), the complete markets economy does reasonably well in matching thewithin-country stylized facts concerning volatility and persistence of macro aggregates. Much more problematic are the complete markets model's implications for cross-country correlations of output, consumption, investment, and labor input. Specifically, this model has difficulty generating positive output comovement (and correspondingly positive comovement of investments and labor inputs across countries). Further, the model predicts a level of cross-country consumption correlationthat is much too high relative to the data.
Because individuals are subject to idiosyncratic (nation-specific) risk in the bond economy, in equilibrium this economy will display nation-specific fluctuations in consumption. Thus we expect that the international correlation between consumptionsshould be lower in the bond economy, and it is-but not much lower.
Similarly, we expect the absence of insurance against labor income risk in the bond economy to alter the response of labor input to productivity shocks. In the complete markets economy, the response to a positive productivity shock in one country generates an increase in labor input in the productive country, and a tendency for a decline in labor input in the relatively unproductive country. Because of the optimal insurance character of the complete markets equilibrium, workers in the productive country agree to "share" some of the additional output generated by the increase in productivity and labor input, in exchange for similar "sharing"when the other country receives a positive productivity shock. In the bond economy, individuals can only smooth consumption across time (by buying or selling bonds); they cannot smooth consumption across different "states of nature" because of the absence of contingent securities. This reduces the tendency for labor input to decline in the temporarily unproductive location.
---<unquote>---
2014年1月9日木曜日
Perpetual Inventory Method
http://faculty.apec.umn.edu/rsmith/documents/CreateCapitalStock.pdf
http://www.econ.umn.edu/~selis004/su11_3102/GrowthAccountingNotes.pdf
---<quote>---
When calculating real investment, it is best to collect data on nominal investment and then deflate the series by a GDP deflator. This procedure ensures the real investment series, and, thus, the capital stock series, and the real GDP series are deflatedby the same price index.
---<unquote>---
http://acta.mendelu.cz/pdf/actaun201361072367.pdf
http://www.econstor.eu/bitstream/10419/71091/1/73983858X.pdf
---<quote>---
Aware of this problem, HARBERGER (1978) uses three-year averages instead of a single year to generate more stable and reliable capital stock estimates. In a later application of the Steady State Approach, NEHRU and DHARESHWAR (1993) proposed an alternative procedure. In order to generate a reliable initial value of the investment time series they regress the time series of log investments on time and then use the fitted value for the first period to calculate the initial capital stock.
---<unquote>---
http://www.econ.umn.edu/~selis004/su11_3102/GrowthAccountingNotes.pdf
---<quote>---
When calculating real investment, it is best to collect data on nominal investment and then deflate the series by a GDP deflator. This procedure ensures the real investment series, and, thus, the capital stock series, and the real GDP series are deflatedby the same price index.
---<unquote>---
http://acta.mendelu.cz/pdf/actaun201361072367.pdf
http://www.econstor.eu/bitstream/10419/71091/1/73983858X.pdf
---<quote>---
Aware of this problem, HARBERGER (1978) uses three-year averages instead of a single year to generate more stable and reliable capital stock estimates. In a later application of the Steady State Approach, NEHRU and DHARESHWAR (1993) proposed an alternative procedure. In order to generate a reliable initial value of the investment time series they regress the time series of log investments on time and then use the fitted value for the first period to calculate the initial capital stock.
---<unquote>---
2013年12月21日土曜日
Study of asset returns in SGM
Naik, V. 1994. "Asset Prices in Dynamic Production Economies with Time-Varying Risk." Review of financial studies, 7(4), 781-801.
Model
(i) time-varying uncertainty of the marginal product of capital (productivity shocks),
(ii) the presence of capital adjustment costs,
(iii) the separation of intertemporal substitution and risk aversion (EZ preferences), and
(iv) the allowance for first-order risk aversion in investors' preferences.
Results
(i) the sensitivity of the price of the aggregate capital stock to shifts in risk is crucially dependent on the level of capital adjustment costs. The effect of shifts in uncertainty is significant only when capital adjustment costs are substantial.
(ii) Intertemporal substitution governs the direction of the effect of changes in risk on the value ofcapital stock. Risk aversion is important in the determination of the magnitude of this effect.
Campanale, C.; R. Castro and G. L. Clementi. 2010. "Asset Pricing in a Production Economy with Chew-Dekel Preferences." Review of Economic Dynamics, 13(2), 379-402.
<quote>
Tallarini (2000) showed that the first of the two issues just outlined can be addressed by disentangling risk aversionfrom the elasticity of intertemporal substitution. By assuming Epstein–Zin preferences, he was able to raise risk aversion at arbitrarily high levels, while keeping the elasticity of substitution anchored at 1. Tallarini went on to show the existence of RRA coefficients such that the market price of risk is consistent with the empirical evidence. However, the price of capital being constant at 1, his model essentially generates no equity premium. This issue was dealt with successfully by Jermann (1998) and Boldrin et al. (2001), who assumed that the allocation of capital cannot adjust immediately or costlessly to productivity shocks. Impediments to the smooth adjustment of capital imply that its price may vary away from 1. However, without limiting households’ willingness to substitute consumption intertemporally, this innovation results mainly in a higher volatility of consumption growth. Both Jermann (1998) and Boldrin et al. (2001) lower the IES by introducing habit formation. The resulting increase in the curvature of the Bernoulli utility function, by increasing risk aversion, also takes care of increasing the volatility of the stochastic discount factor.
<unquote>
SGM; Stochastic Growth Model
Model
(i) time-varying uncertainty of the marginal product of capital (productivity shocks),
(ii) the presence of capital adjustment costs,
(iii) the separation of intertemporal substitution and risk aversion (EZ preferences), and
(iv) the allowance for first-order risk aversion in investors' preferences.
Results
(i) the sensitivity of the price of the aggregate capital stock to shifts in risk is crucially dependent on the level of capital adjustment costs. The effect of shifts in uncertainty is significant only when capital adjustment costs are substantial.
(ii) Intertemporal substitution governs the direction of the effect of changes in risk on the value ofcapital stock. Risk aversion is important in the determination of the magnitude of this effect.
Campanale, C.; R. Castro and G. L. Clementi. 2010. "Asset Pricing in a Production Economy with Chew-Dekel Preferences." Review of Economic Dynamics, 13(2), 379-402.
<quote>
Tallarini (2000) showed that the first of the two issues just outlined can be addressed by disentangling risk aversionfrom the elasticity of intertemporal substitution. By assuming Epstein–Zin preferences, he was able to raise risk aversion at arbitrarily high levels, while keeping the elasticity of substitution anchored at 1. Tallarini went on to show the existence of RRA coefficients such that the market price of risk is consistent with the empirical evidence. However, the price of capital being constant at 1, his model essentially generates no equity premium. This issue was dealt with successfully by Jermann (1998) and Boldrin et al. (2001), who assumed that the allocation of capital cannot adjust immediately or costlessly to productivity shocks. Impediments to the smooth adjustment of capital imply that its price may vary away from 1. However, without limiting households’ willingness to substitute consumption intertemporally, this innovation results mainly in a higher volatility of consumption growth. Both Jermann (1998) and Boldrin et al. (2001) lower the IES by introducing habit formation. The resulting increase in the curvature of the Bernoulli utility function, by increasing risk aversion, also takes care of increasing the volatility of the stochastic discount factor.
<unquote>
SGM; Stochastic Growth Model
2013年12月6日金曜日
2013年12月1日日曜日
Asset price leads business cycles
Backus, David K.; Routledge, Bryan R.; and Zin, Stanley E., "Asset Prices in Business Cycle Analysis" (2007). Tepper School of Business. Paper 414.
http://repository.cmu.edu/cgi/viewcontent.cgi?article=1414&context=tepper
http://repository.cmu.edu/cgi/viewcontent.cgi?article=1414&context=tepper
登録:
投稿 (Atom)