economics 442 macroeconomic policy - sscc - homemchinn/e442_lecture11_s18.pdf · 2018-03-06 ·...
TRANSCRIPT
Economics 442Macroeconomic Policy
Lecture 113/5/2018
Instructor: Prof. Menzie ChinnUW MadisonSpring 2018
Outline
• Eggertson and Mehrotra• Slow Productivity Growth
Summary
• Young borrow to consume• Middle age save for retirement• Old consume and dis‐save
• Key: Exogenous borrowing constraint on young
Dt, gt exogenous
Deleveraging Shock
• A sudden and permanent reduction in D.• The Young generation borrows less than before.
• When they become the Middle aged generation, they have less debt, and have more to save.
• The resulting lower interest rate loosens constraint for young, induces more spending for Middle
An Aging Society
An Aging Society
• Aging society is represented by reduction in parameter g
• Recall loan demand equation has g parameter in it
‘
g’ < g
Income Inequality
Income Inequality
Income Inequality
g’ < g
Endogenous Output, Permanent Inflation, ZLB
AD Shift
Supply Side Economics?
Inflation Targeting
Fiscal Policy
Capital Goods Price