Wealth and Volatility

• 成果类型: Article
• 署名作者: Heathcote, Jonathan; Perri, Fabrizio
• 署名单位: Federal Reserve System - USA; Federal Reserve Bank - Minneapolis; Center for Economic & Policy Research (CEPR)
• 刊物名称: REVIEW OF ECONOMIC STUDIES
• ISSN/ISSBN: 0034-6527
• DOI: 10.1093/restud/rdx074
• 发表日期: 2018
• 页码: 2173-2213
• 关键词: jobless recoveries; great recession; business-cycle; fiscal-policy; unemployment; RISK; fluctuations; equilibrium; consumption; insurance

摘要

Between 2007 and 2013, U.S. households experienced a large and persistent decline in net worth. The objective of this article is to study the business cycle implications of such a decline. We first develop a tractable monetary model in which households face idiosyncratic unemployment risk that they can partially self-insure using savings. A low level of liquid household wealth opens the door to self-fulfilling fluctuations: if wealth-poor households expect high unemployment, they have a strong precautionary incentive to cut spending, which can make the expectation of high unemployment a reality. Monetary policy, because of the zero lower bound, cannot rule out such expectations-driven recessions. In contrast, when wealth is sufficiently high, an aggressive monetary policy can keep the economy at full employment. Finally, we document that during the U.S. Great Recession wealth-poor households increased saving more sharply than richer households, pointing towards the importance of the precautionary channel over this period.