The macroeconomic effects of microeconomic inaction

Objectif

A large part of macroeconomics embeds some form of inertial behavior by firms and/or house- holds. Whether it is in price or wage setting, real or financial investment choices, saving or consumption decisions, some element of stickiness leading to inaction ranges in individuals’ choices (in prices, consumption, investment) is often included to reconcile the model with observed individual data. Yet the specific assumptions to model this inertia mostly reflect tractability concerns, while less attention is paid to consistency with observations at the micro level. This issue is important for macroeconomics because different frictions, generating the same individual stickiness, imply different size and persistence in the response of the aggregate economy to macro shocks. Depending on modeling assumptions, the aggregate effects of stickiness range from being negligible to being substantial. We will propose methods so that the frictions will be structurally identified, and their consequences analytically explored.

This project has two broad goals. The first one is to construct tractable macroeconomic models, based on individual behavior, that will yield substantial improvements in matching the patterns on the infrequent and heterogeneous adjustment recently documented in the micro data. In our structural models the micro evidence will serve as an identification device for the proper modeling of the frictions faced by the agents. The second goal is to produce analytical tools to study the transmission of aggregate shocks (in money, interest rates, productivity, asset prices) in economies characterized by adjustment costs and cross-section heterogeneity. In particular, we will develop useful analytical methods to approximate the steady state behavior of an economy with stickiness, and to characterize the economy’s response to aggregate shocks.

Champ scientifique

Régime de financement

ERC-AG - ERC Advanced Grant

Institution d’accueil

Istituto Einaudi per l'Economia e la Finanza

Contribution de l’UE

€ 1 946 788,00

Adresse

via sallustiana 62
00187 ROMA
Italie

Région

Centro (IT) Lazio Roma

Type d’activité

Research Organisations

Chercheur principal

Francesco Lippi (Prof.)

Contact administratif

Marco Pagano (Prof.)

Liens

Contacter l’organisation Site web

Coût total

Aucune donnée

Bénéficiaires (1)