scholarly journals GROWTH AND WELFARE EFFECTS OF MACROPRUDENTIAL REGULATION

2018 ◽  
Vol 23 (8) ◽  
pp. 3140-3162 ◽  
Author(s):  
Pierre-Richard Agénor
Keyword(s):  
Systemic Risk ◽  
Overlapping Generations ◽  
Welfare Effects ◽  
Financial Supervision ◽  
Overlapping Generations Model ◽  
Macroprudential Regulation ◽  
Bank Monitoring ◽  
Investment Projects ◽  
Optimal Monitoring ◽  
Reserve Ratio

This paper studies the growth and welfare effects of macroprudential regulation in an overlapping generations model of endogenous growth with banking and agency costs. Indivisible investment projects combine with informational imperfections to create a double moral hazard problem à la Holmström–Tirole and a role for bank monitoring. When the optimal monitoring intensity is endogenously determined, an increase in the required reserve ratio (motivated by systemic risk considerations) has conflicting effects on investment and growth. On one hand, requiring banks to put away a fraction of the deposits that they receive reduces the supply of loanable funds. On the other, a higher required ratio raises incentives to save and mitigates banks' incentives to monitor, thereby lowering monitoring costs and freeing up resources to increase lending. In addition, it may mitigate the systemic risk externality associated with excessive leverage. This trade-off can be internalized by choosing the required reserve ratio that maximizes growth and welfare. However, the risk of disintermediation means that in practice financial supervision may also need to be strengthened, and the perimeter of regulation broadened, if the optimal ratio is relatively high.

scholarly journals Fiscal Consolidation: Welfare Effects of the Adjustment Speed

2020 ◽  
pp. 39-67
Author(s):  
Miguel Fonseca
Keyword(s):  
Incomplete Markets ◽  
Overlapping Generations ◽  
German Economy ◽  
Welfare Effects ◽  
Fiscal Consolidation ◽  
Welfare Gains ◽  
Overlapping Generations Model ◽  
Distribution Of Wealth ◽  
Adjustment Speed ◽  
Fiscal Consolidations

This article studies the response of social welfare to fiscal consolidations, by focusing on a less debated characteristic of fiscal plans: the speed of deleveraging. A neoclassical overlapping generations model is calibrated to the German economy, and a sequence of reductions of the same size in the debt‑ to GDP ratio are simulated considering different adjustment periods. Welfare gains are found to be larger in slow, delayed fiscal consolidations, due to the presence of incomplete markets. It is also found that the aggregate welfare response depends on the distribution of wealth and the type of fiscal instrument used.

scholarly journals DEALING WITH UNDOCUMENTED IMMIGRANTS: THE WELFARE EFFECTS OF AMNESTIES AND DEPORTATIONS

2017 ◽  
Vol 83 (4) ◽  
pp. 445-492 ◽  
Author(s):  
Joël Machado
Keyword(s):  
Undocumented Immigrants ◽  
Overlapping Generations ◽  
Migration Policy ◽  
The United States ◽  
Welfare Effects ◽  
Government Budget ◽  
Overlapping Generations Model ◽  
Wage Effects ◽  
The Government ◽  
The Impact

Abstract:The effects on agents’ welfare of two different policies dealing with undocumented immigrants, amnesties and deportations, are assessed. I develop a two-period overlapping generations model which accounts for the ex-ante production by undocumented workers and their impact on the government budget. Additional channels, such as the discrimination on the labor market and a different productivity of regularized workers are discussed. The impact of a migration policy depends on the wage effects of the legalized/deported workers and their net fiscal contribution. The calibration of the model for the United States in 2014 allows to disentangle the channels at work. Overall, the impact of the two policies on natives’ welfare is limited (between −0.1% and +0.15%). Retired agents benefit from an amnesty and are harmed by a deportation. The effect on workers is ambiguous and depends on the wage and fiscal effects in addition to the change in the returns on savings.

scholarly journals FACING DEMOGRAPHIC CHALLENGES: PENSION CUTS OR TAX HIKES?

2018 ◽  
Vol 23 (2) ◽  
pp. 625-673 ◽  
Author(s):  
George Kudrna ◽  
Chung Tran ◽  
Alan Woodland
Keyword(s):  
Government Spending ◽  
Overlapping Generations ◽  
Welfare Effects ◽  
Policy Reforms ◽  
Overlapping Generations Model ◽  
Political Complexity ◽  
Demographic Challenges ◽  
Age Related ◽  
Advanced Economies ◽  
Fiscal Pressure

A challenge that faces many advanced economies is how to finance age-related spending programs as the population ages. In this paper, we investigate two policy options–pension cuts and tax hikes–to mitigate fiscal pressure arising in the special context of Australia, whose population is ageing fast while growing substantially in size due to immigration. Using a computable overlapping generations model, we find that while both policy reforms can achieve a similar fiscal goal, they lead to different distributional and welfare effects across income groups over time. Future generations prefer pension cuts, whereas current generations prefer tax hikes to finance government spending commitments. Moreover, within the tax hike option, taxing income or consumption results in opposing macroeconomic and welfare effects. Indeed, our opposing intra- and inter-temporal welfare outcomes highlight some political complexity when devising a more sustainable tax-transfer system.

Welfare Implications of Uncertain Social Security Reform

2020 ◽  
Vol 48 (4) ◽  
pp. 425-466
Author(s):  
Jaeger Nelson
Keyword(s):  
Social Security ◽  
Overlapping Generations ◽  
Welfare Effects ◽  
Policy Uncertainty ◽  
Social Security Reform ◽  
Overlapping Generations Model ◽  
Aggregate Risk ◽  
Highly Sensitive ◽  
Welfare Implications ◽  
Future Policy

Policy uncertainty is a type of aggregate risk that has important economic and welfare implications. In this article, I develop a simple general equilibrium overlapping generations model in which households are uncertain as to the type and timing of an inevitable Social Security reform. I document how households’ expectations over the path of future policy influences their behavior. I find that the economic and welfare effects of policy uncertainty are highly sensitive to households’ beliefs over the path of future policy.

Sign in / Sign up

Export Citation Format

Share Document