References of "Journal of Economic Dynamics & Control"
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See detailFinancial intermediation in a noverlapping generations model with transaction costs
Van Bommel, Jos UL; Hasman, Augusto; Samartín, Margarita

in Journal of Economic Dynamics & Control (2014)

We analyze an overlapping generations economy where agents interact to share liquidity risk. We show that a pure exchange economy has excessive trade in equilibrium because agents interact to rebalance ... [more ▼]

We analyze an overlapping generations economy where agents interact to share liquidity risk. We show that a pure exchange economy has excessive trade in equilibrium because agents interact to rebalance their portfolios. Intergenerational financial intermediaries reduce the number of interactions because agents only transact when they face liquidity needs. In the absence of asset risk, intermediaries match redemptions with deposits and dividends, and never sell assets. If the economy is subject to transaction costs, the intermediated economy can sustain higher stationary investment and welfare. We also find that dead weight transaction costs can increase welfare because it protects banks from interbank arbitrage and dampens the inherent cyclicality of market economies. [less ▲]

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See detailPopulation, Pensions, and Endogenous Economic Growth
Irmen, Andreas UL; Heer, Burkhard

in Journal of Economic Dynamics & Control (2014), 46

We study the effect of a declining labor force on the incentives to engage in labor-saving technical change and ask how this effect is influenced by institutional characteristics of the pension scheme ... [more ▼]

We study the effect of a declining labor force on the incentives to engage in labor-saving technical change and ask how this effect is influenced by institutional characteristics of the pension scheme. When labor is scarcer it becomes more expensive and innovation investments that increase labor productivity are more profitable. We incorporate this channel in a new dynamic general equilibrium model with endogenous economic growth and heterogeneous overlapping generations. We calibrate the model for the US economy and obtain the following results. First, the effect of a decline in population growth on labor productivity growth is positive and quantitatively significant. In our benchmark, it is predicted to increase from an average annual growth rate of 1.74% over 1990–2000 to 2.41% in 2100. Second, institutional characteristics of the pension system matter both for the growth performance and for individual welfare. Third, the assessment of pension reform proposals may depend on whether economic growth is endogenous or exogenous. [less ▲]

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See detailDeregulation shock in product market and unemployment
Bertinelli, Luisito UL; Cardi, Olivier; Sen, Partha

in Journal of Economic Dynamics & Control (2013), 37(4), 711-734

In a dynamic general equilibrium model with endogenous markups and labor market frictions, we investigate the effects of increased product market competition. Unlike most macroeconomic models of search ... [more ▼]

In a dynamic general equilibrium model with endogenous markups and labor market frictions, we investigate the effects of increased product market competition. Unlike most macroeconomic models of search, we endogenize the labor supply along the extensive margin. We find numerically that a model with endogenous labor force participation decision produces a decline in the unemployment rate which is almost three times larger than that in a model with fixed labor force. For a calibration capturing alternatively the European and the US labor markets, a deregulation episode, which lowers the markup by 3 percentage points, results in a fall in the unemployment rate by 0.17 and 0.05 percentage point, respectively, while the labor share is almost unaffected in the long-run. The sensitivity analysis reveals that product market deregulation is more effective in countries where product and labor market regulations are high, unemployment benefits are small and labor force is more responsive. [less ▲]

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See detailAging and Pensions in General Equilibrium: Labour Market Imperfections Matter
de la Croix, David; Pierrard, Olivier; Sneessens, Henri UL

in Journal of Economic Dynamics & Control (2013), 37

We re-examine the effects of population aging and pension reforms in an OLG model with labor market frictions. The most important feature brought about by labor market frictions is the connection between ... [more ▼]

We re-examine the effects of population aging and pension reforms in an OLG model with labor market frictions. The most important feature brought about by labor market frictions is the connection between the interest rate and the unemployment rate. Exogenous shocks (such as aging) leading to lower interest rates also imply lower equilibrium unemployment rates, because lower capital costs stimulate labor demand and induce firms to advertise more vacancies. These effects may be reinforced by increases in the participation rate of older workers, induced by the higher wage rates and the larger probability of finding a job. These results imply that neglecting labor market frictions and employment rate dynamics may seriously bias the evaluation of pension reforms when they have an impact on the equilibrium interest rate. [less ▲]

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See detailExplaining dispersion in foreign exchange expectations:A heterogeneous agent approach
Wolff, Christian UL; Jongen, Ron; Verschoor, Willem et al

in Journal of Economic Dynamics & Control (2012), 1

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See detailSteady-State Growth and the Elasticity of Substitution
Irmen, Andreas UL

in Journal of Economic Dynamics & Control (2011), 35

In a neoclassical economy with endogenous capital- and labor-augmenting technical change the steady-state growth rate of output per worker is shown to increase in the elasticity of substitution between ... [more ▼]

In a neoclassical economy with endogenous capital- and labor-augmenting technical change the steady-state growth rate of output per worker is shown to increase in the elasticity of substitution between capital and labor. This confirms the assessment of Klump and de La Grandville (2000) that a greater elasticity of substitution allows for faster of economic growth. However, unlike their findings my result applies to the steady-state growth rate. Moreover, it does not hinge on particular assumptions on how aggregate savings come about. It holds for any household sector allowing savings to grow at the same rate as aggregate output. Download Info [less ▲]

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See detailForeign direct investment under international competition : Control of Spillover ?
Dawid, Herbert; Greiner, Alfred; Zou, Benteng UL

in Journal of Economic Dynamics & Control (2010)

In this paper we present a dynamic model of a firm which is deciding whether to outsource parts of its production to a less developed economy where wages and the level of technology are lower. Outsourcing ... [more ▼]

In this paper we present a dynamic model of a firm which is deciding whether to outsource parts of its production to a less developed economy where wages and the level of technology are lower. Outsourcing reduces production costs but is associated with spillovers to foreign potential competitors. Spillovers over time increase productivity of firms in the foreign country and make them stronger competitors on the common market. The paper analyzes the inter-temporally optimal behavior of the firm and shows that two outcomes are possible in the long-run. One outcome is that there is one steady state where the firm invests a positive amount in the foreign country and the other outcome is a continuum of steady states with no investment. The paper then derives conditions such that it is optimal for the firm to invest in the foreign country and characterizes different types of optimal dynamic investment patterns. In addition, using numerical dynamic optimization methods, the effect of the speed of technology adoption and of the wage differential on total labor income in the home country is studied taking into account the transition dynamics. [less ▲]

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See detailRisk premiums and macroeconomic dynamics in a heterogeneous agent model
De Graeve, Ferre; Dossche, Maarten; Emiris, Marina et al

in Journal of Economic Dynamics & Control (2010), 34

We analyze financial risk premiums and real economic dynamics in a DSGE model with three types of agents - shareholders, bondholders and workers - that differ in participation in the capital market and in ... [more ▼]

We analyze financial risk premiums and real economic dynamics in a DSGE model with three types of agents - shareholders, bondholders and workers - that differ in participation in the capital market and in attitude towards risk and intertemporal substitution. Aggregate productivity and distribution risks are transferred across these agents via the bond market and via an efficient labor contract. The result is a combination of volatile returns to capital and a highly cyclical consumption process for the shareholders, which are two important ingredients for generating high and counter-cyclical risk premiums. These risk premiums are consistent with a strong propagation mechanism through an elastic supply of labor, rigid real wages and a counter-cyclical labor share. Based on the empirical estimates for the two sources of real macroeconomic risk, the model generates significant and plausible time variation in both bond and equity risk premiums. Interestingly, the single largest jump in both the risk premium and the price of risk is observed during the current recession. [less ▲]

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See detailBehavioral Heterogeneity in the Option Market
Lehnert, Thorsten UL; Frijns, Bart; Zwinkels, R.

in Journal of Economic Dynamics & Control (2010)

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See detailExtensive and intensive growth in a neoclassical framework
Irmen, Andreas UL

in Journal of Economic Dynamics & Control (2005), 29(8), 1427-1448

Extensive growth based on the expansion of inputs is likely to be subject to diminishing returns. Therefore it is often viewed as having no effect on per capita magnitudes in the long run. This Paper ... [more ▼]

Extensive growth based on the expansion of inputs is likely to be subject to diminishing returns. Therefore it is often viewed as having no effect on per capita magnitudes in the long run. This Paper argues that periods of extensive growth through capital accumulation may be a precursor to periods of intensive growth during which output per unit of input grows through endogenous technical change. Such a sequence of stages of development occurs as capital accumulation affects the incentives to engage in labour-saving technical change. A steady rise in the capital-labour ratio affects the relative scarcity of factors of production, their (expected) relative price, and induces innovation investments.<P>(This abstract was borrowed from another version of this item.) [less ▲]

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See detailNetwork Structure and the Diffusion of Knowledge
Cowan, Robin; Jonard, Nicolas UL

in Journal of Economic Dynamics & Control (2004), 28

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See detailCapacity Utilization and Market Power
Fagnart, J.F.; Licandro, O.; Sneessens, Henri UL

in Journal of Economic Dynamics & Control (1997), 22

We propose a theoretical macroeconomic model where capacity underutilization follows from idiosyncratic demand uncertainty at the time monopolistic firms must choose their productive capacity. After their ... [more ▼]

We propose a theoretical macroeconomic model where capacity underutilization follows from idiosyncratic demand uncertainty at the time monopolistic firms must choose their productive capacity. After their investment decision, firms facing a low demand will typically prefer to run excess capacities rather than reduce their profit margin; firms at full capacity will respond to demand fluctuations solely by price adjustments. We show that the proportion of firms with idle capacities influences crucially the short-run response of the economy to exogenous disturbances and, in particular, the relative importance of price and quantity adjustments. [less ▲]

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