The Welfare and Distributional Eﬀects of Fiscal Volatility: a Quantitative

Speaker: Prof. Jinhui Bai (Washington State University)


Topic:	The Welfare and Distributional Eﬀects of Fiscal Volatility: a Quantitative
Time&Date:	12:00pm-13:30pm, 2018/6/8
Venue:	Room A619, Teaching A
Speaker:	Prof. Jinhui Bai (Washington State University)
Abstract:	This study explores the welfare and distributional eﬀects of ﬁscal volatility using a neoclassical stochastic growth model with incomplete markets. In our model, households face uninsurable idiosyncratic risks in their labor income and discount factor processes, and we allow aggregate uncertainty to arise from both productivity and government purchases shocks. We calibrate our model to key features of the U.S. economy, before eliminating government purchases shocks. We then evaluate the distributional consequences of the elimination of ﬁscal volatility and ﬁnd that, in our baseline case, welfare gains increase with private wealth holdings.