Intergenerational Redistributive Effects of Monetary Policy

2021 ◽  
Author(s):  
Marcin Bielecki ◽  
Michał Brzoza-Brzezina ◽  
Marcin Kolasa
Keyword(s):  
Monetary Policy ◽  
Life Cycle ◽  
Household Finance ◽  
Labor Income ◽  
Monetary Shocks ◽  
Financial Assets ◽  
Asset Accumulation ◽  
Cycle Model ◽  
Net Worth ◽  
Redistributive Effects

Abstract This paper investigates the distributional consequences of monetary policy across generations. We use a life-cycle model with a rich asset structure as well as nominal and real rigidities, calibrated to the euro area using both macroeconomic aggregates and microeconomic evidence from the Household Finance and Consumption Survey. We show that the life-cycle profiles of income and asset accumulation decisions are important determinants of redistributive effects of monetary shocks. The redistribution is mainly driven by nominal assets and labor income, less by real financial assets and housing. Overall, we find that a typical monetary policy easing redistributes welfare from older to younger generations, and decreases net worth inequality associated with life-cycle motives.

scholarly journals The Redistributive Effects of Monetary Policy Across Generations

2018 ◽  
pp. 44-60 ◽  
Author(s):  
Olga Bondarenko
Keyword(s):  
Monetary Policy ◽  
Overlapping Generations ◽  
Income Group ◽  
New Keynesian ◽  
Labor Income ◽  
Monetary Shocks ◽  
Olg Model ◽  
Debt Accumulation ◽  
Policy Transmission ◽  
Redistributive Effects

The paper revises the redistributive channels of monetary policy transmission and their impact on income and wealth distributions in a New-Keynesian Overlapping Generations (OLG) model. The model mimics total asset holdings and earnings processes of several types of households across generations, based on their attitude to saving and income group. In this environment, expansionary monetary shocks stimulate capital and debt accumulation to a larger extent for middle-aged individuals, contributing to intergenerational inequality. Heterogeneity of labor income augments this effect, benefitting richer and more productive workers.

scholarly journals Learning Your Earning: Are Labor Income Shocks Really Very Persistent?

2007 ◽  
Vol 97 (3) ◽  
pp. 687-712 ◽  
Author(s):  
Fatih Guvenen
Keyword(s):  
Life Cycle ◽  
Current Literature ◽  
Previous Literature ◽  
Labor Income ◽  
Income Shocks ◽  
Life Cycle Model ◽  
Cycle Model ◽  
Consumption Data ◽  
Hip Process

The current literature offers two views on the nature of the labor income process. According to the first view, individuals are subject to very persistent income shocks while facing similar life-cycle income profiles (the RIP process, Thomas MaCurdy 1982). According to the alternative, individuals are subject to shocks with modest persistence while facing individual-specific profiles (the HIP process, Lee A. Lillard and Yoram A. Weiss 1979). In this paper we study the restrictions imposed by these two processes on consumption data—in the context of a life-cycle model—to distinguish between the two views. We find that the life-cycle model with a HIP process, which has not been studied in the previous literature, is consistent with several features of consumption data, whereas the model with a RIP process is consistent with some, but not with others. We conclude that the HIP model could be a credible contender to—and along some dimensions, a more coherent alternative than—the RIP model. (JEL D83, D91, E21, J31)

ACCOUNTING FOR LIFE-CYCLE WEALTH ACCUMULATION: THE ROLE OF HOUSING INSTITUTION

2011 ◽  
Vol 16 (4) ◽  
pp. 493-517 ◽  
Author(s):  
Sang-Wook (Stanley) Cho
Keyword(s):  
Life Cycle ◽  
The United States ◽  
Mortgage Market ◽  
Wealth Accumulation ◽  
Labor Income ◽  
Life Cycle Model ◽  
Cycle Model ◽  
Policy Experiments ◽  
Cross Country

This paper constructs a quantitative general equilibrium life-cycle model with uninsurable labor income to account for the differences in wealth accumulation and homeownership between Korea and the United States. The model incorporates different structures in the housing market in the two countries, namely, the mortgage market and the rental arrangements. The results from the calibrated model quantitatively explain some empirical findings in the aggregate and life-cycle profiles of wealth and homeownership. Quantitative policy experiments show that the mortgage market alone can account for more than 40% of the differences in the aggregate homeownership ratios. When coupled with the rental arrangements, both institutions can account for approximately 52% of the differences in the cross-country homeownership ratios.

Financial-Asset Accumulation by the Noncorporate Private Sector in Pakistan 1959/60 to 1965/66 (Notes and Comments)

1969 ◽  
Vol 9 (1) ◽  
pp. 66-86
Author(s):  
Abdul Ghafur
Keyword(s):  
Private Sector ◽  
Portfolio Selection ◽  
Domestic Saving ◽  
Financial Asset ◽  
Financial Assets ◽  
Asset Accumulation ◽  
Net Worth ◽  
Current Consumption ◽  
Real Assets ◽  
Insight Into

A detailed investigation into the sources of domestic saving and its uses by various sectors can provide us with a more complete insight into behaviour with respect to saving, portfolio selection, and the pattern of financial interrelationship among sectors. The saving(s) of each sector is defined as the excess of its income (y) over its expenditure on current consumption (c), i.e., s = y—c. Saving (dissaving) by a sector is equivalent to increase (decrease) in the net worth (NW) of that sector over the previous year. A sector that saves must either acquire financial assets, i.e., money and other financial claims, reduce financial liabilities or acquire real assets. In formal terms, s = A net worth = A (financial assets — financial liabilities) + A real assets1 [8]. It is quite clear that saving may be reflected in a change of net financial assets or in a change in real asset; a change in net holdings of financial assets may indicate either saving or a change in holdings of real assets. It is even possible, albeit unusual, that an increase in the level of financial-asset acquisition is associated with a negative saving (y /. c) by a sector. However, while it dose not measure the level of saving by a sector, the net acquisition of financial assets does reflect the extent of transfer of resources (both stock and flow) by the sector to other sectors.

CONSUMPTION AND SAVING OVER THE LIFE CYCLE: HOW IMPORTANT ARE CONSUMER DURABLES?

2011 ◽  
Vol 15 (5) ◽  
pp. 725-770 ◽  
Author(s):  
Jesús Fernández-Villaverde ◽  
Dirk Krueger
Keyword(s):  
Life Cycle ◽  
Borrowing Constraints ◽  
Financial Assets ◽  
Cycle Model ◽  
Consumer Durables ◽  
Nondurable Goods ◽  
Consumption Expenditures ◽  
Order Of Magnitude ◽  
Consumption And Saving ◽  
Standard Life

In this paper we investigate whether a standard life-cycle model in which households purchase nondurable consumption and consumer durables and face idiosyncratic income and mortality risk as well as endogenous borrowing constraints can account for two key patterns of consumption and asset holdings over the life cycle. First, consumption expenditures on both durable and nondurable goods are hump-shaped. Second, young households keep very few liquid assets and hold most of their wealth in consumer durables. In our model durables play a dual role: they both provide consumption services and act as collateral for loans. A plausibly parameterized version of the model predicts that the interaction of consumer durables and endogenous borrowing constraints induces durables accumulation early in life and higher consumption of nondurables and accumulation of financial assets later in the life cycle, of an order of magnitude consistent with observed data.

scholarly journals Intergenerational Transfers and the Accumulation of Wealth

1994 ◽  
Vol 8 (4) ◽  
pp. 145-160 ◽  
Author(s):  
William G Gale ◽  
John Karl Scholz
Keyword(s):  
Life Cycle ◽  
Intergenerational Transfers ◽  
Life Cycle Model ◽  
Cycle Model ◽  
Net Worth ◽  
Household Data ◽  
The U.S

This paper uses household data to provide direct estimates of intergenerational transfers as a source of wealth. The authors distinguish between intended transfers (for example, gifts to other households) and possibly unintended transfers (bequests) and estimate that intended transfers account for at least 20 percent of net worth. Thus, a significant portion of the U.S. wealth cannot be explained by the life-cycle model, even when the model is augmented to allow for bequests. Estimated bequests can account for an additional 31 percent of net worth. The authors also show that transfers among living people are about half as large as bequests.

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