Antonia Díaz

Precautionary savings and wealth distribution under habit formation preferences

Abstract We study the role of habit formation in shaping the amount of precautionary savings and the wealth distribution in heterogeneous agents model economies with idiosyncratic uncertainty. We adjust preferences to equate the Intertemporal Elasticity of Substitution in all model economies. We find that habit formation brings a hefty increase in precautionary savings and very mild reductions in the coefficient of variation and in the Gini index of wealth. These findings hold for both persistent and non-persistent habits, with the effects of the former being much larger.

House Prices, Sales, and Time on the Market: A Search‐Theoretic Framework

In this document we present additional results for our main paper. First, we prove some properties of the steady state of our benchmark economy. Then, we present an alternative calibration

The Wealth Distribution with Durable Goods

In the United States, the distribution of houses is less egalitarian than that of earnings for the total population, but these two distributions are remarkably similar for homeowners. Additionally, housing as a fraction of total wealth decreases with the level of wealth. In order to understand the different factors that account for these wealth composition patterns, we introduce illiquid houses and collateral credit in a general equilibrium model of heterogeneous agents with idiosyncratic uncertainty. A combination of very persistent shocks to earnings, frictions in the housing market, and a rental market is necessary to obtain numbers in line with the evidence.

Credit and Inflation under Borrower's Lack of Commitment ∗

Here we investigate the existence of credit in a cash-in-advance economy where there are complete markets but for the fact that agents cannot commit to repay their debts. Defectors are banned from the credit market but they can use money balances for saving purposes. Without uncertainty, deflation crowds out credit completely. The equilibrium allocation, however, is efficient if the government deflates at the time preference rate. Efficiency can also be restored with positive inflation. For any non negative inflation rate below the optimal level, the volume of credit and the real interest rate increase with inflation. Our results hold when idiosyncratic uncertainty is introduced and households are sufficiently impatient but in one instance: efficiency cannot be restored if the deflation rate is nearby the rate of time preference. Our numerical examples suggest that the optimal inflation rate is not too large for reasonable levels of patience and risk aversion. Finally, we present a framework where the use of money arises endogenously and show that it is tantamount to our cash-in-advance framework. Our results hold in this modified environment.

Investment, Technological Progress and Energy Efficiency

In this paper we propose a macroeconomic model where energy intensity at the macro level responds to changes in energy prices and technological innovations. In our theory those changes operate through the choice of energy efficiency, which is embodied in new vintages of capital that differ due to Investment Specific Technological Change. Higher ISTC acts as an energy saving device. If energy prices stay constant, a permanent increase in the growth rate of ISTC may rise energy intensity in the long run, producing a rebound effect. This is so because the combination of higher ISTC growth rate and constant energy prices makes agents to choose less energy efficient capital goods. This may not be the case with rising energy prices. Thus, our theory can be used to test when and how we should see a rebound effect in energy use at the aggregate level and can be used to evaluate the aggregate effect of any policy aiming to reduce energy use.

Long-Run and Business Cycle Factors of the Spanish Economy

The construction of a model for simulation and policy evaluation of the Spanish economy constitutes a far-reaching project. This research task involves the specification of the behavioural equations that better describe the economy, as will be explained in the next chapter. Growth and cyclical regularities impose several restrictions on the specification and calibration of a useful general equilibrium model. For this reason much effort is needed in the analysis of the long-and short-run stylised factors of the Spanish economy. Thus throughout this chapter we shall study what has been behind the pattern of growth of the Spanish economy in recent decades, what has determined its labour productivity and what are the special features characterising business cycles in Spain.