We analyse the interaction between the lack of credibility (or uncertainty) regarding central bank’s inflation target and central bank’s stabilisation policy. We consider a model in which private sector is uncertain about the bank’s inflation target and update its beliefs on it. Furthermore, we assume that the bank cannot observe the private-sector belief about the inflation target as well as f...

Over 60% of US households with credit cards are currently borrowing – i.e., paying interest – on those cards. We attempt to reconcile the high rate of credit card borrowing with observed levels of lifecycle wealth accumulation. We simulate a lifecycle model with five properties that create demand for credit card borrowing. First, the calibrated labor income path slopes upward early in life. Sec...

Sustained growth in earnings and wage inequality over the past few decades (most notably in the U.S. but also in many other developed countries) has generated widespread interest in both its causes and consequences, spurring large bodies of research in labor economics, macroeconomics, and growth economics.1 Perhaps, the greatest efforts have been devoted to understanding the role of skills, obs...

This paper develops a framework for the quantitative analysis of individual income dynamics, mobility and welfare. Individual income is assumed to follow a stochastic process with two (unobserved) components, an i.i.d. component representing measurement error or transitory income shocks and an AR(1) component representing persistent changes in income. We use a tractable consumption-saving model...

The textbook version of the life-cycle permanent income hypothesis with no liquidity constraints predicts that consumption should react very little to transitory shocks to income and very strongly to permanent shocks. This prediction has important policy implications, i.e., to understand the response of consumers to tax rebates or increases that are made for stabilization purposes. In recent ye...

This paper studies incentives in a dynamic contracting framework of a levered firm. In particular, the manager selects long-term and short-term efforts, while shareholders choose initially optimal leverage and ex-post optimal default policies. There are three results. First, shareholders trade off the benefits of short-termism (current cash flows) against the benefits of higher growth from long...

Abstract This paper provides estimates of persistence in historical UK data on life expectancy applying fractional integration methods to both an annual series from 1842 2019 and a 5-year average 1543 2019. method is the most appropriate for our purposes since it more general flexible than classical based integer differentiation. The results indicate that former exhibits upward trend persistent...

Purpose Over the last couple of years, Chinese manufacturing sector was affected by onset US–China trade war and outbreak coronavirus disease 2019 (COVID-19). In such a scenario air quality in China has encountered shock, impacts these two incidents are unknown. this study, authors analyze convergence presence multiple structural breaks how events different from each other. Design/methodology/a...

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This paper applies conventional panel unit root tests and panel stationarity tests with and without structural breaks to examine the time series properties of real Gross Domestic Product (GDP) per capita for a panel of eight Pacific Island economies. The panel unit root and panel stationarity tests without structural breaks suggest that for the panel as a whole real GDP per capita contains a un...