Topic：The Welfare and Distributional Effects of Fiscal Volatility: a Quantitative Evaluation

Speaker：Dr BAI Jinhui，Washington State University

Time：10:00~11:30， May 18，2018

Site：EMS B228

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.