Time-varying idiosyncratic risk and aggregate consumption dynamics

• 成果类型: Article
• 署名作者: Mckay, Alisdair
• 署名单位: Boston University
• 刊物名称: JOURNAL OF MONETARY ECONOMICS
• ISSN/ISSBN: 0304-3932
• DOI: 10.1016/j.jmoneco.2017.05.002
• 发表日期: 2017
• 页码: 1-14
• 关键词: consumption; idiosyncratic risk; incomplete markets; business cycle

摘要

Long-term earnings losses for displaced workers are large and counter-cyclical. Similarly, the skewness of earnings growth rates is strongly pro-cyclical. This paper presents an incomplete markets business cycle model in which idiosyncratic risk varies over time in accordance with these empirical findings. These dynamics of idiosyncratic risk give rise to a cyclical precautionary savings motive that substantially raises the volatility of aggregate consumption growth. According to the model, idiosyncratic risk spiked during the Great Recession, leading to a substantial decline in aggregate consumption. (C) 2017 Elsevier B.V. All rights reserved.