Speaker: Juan Rubio Ramirez (Duke University) conducts research within the fields of dynamic equilibrium macroeconomic models and time series econometrics. Lately he has also been working on international economic issues, the relationship between volatility and macroeconomic fluctuations, and finance issues. More »
Abstract: We formulate and estimate a tractable macroeconomic model with time-varying precautionary savings. We argue that the latter affect aggregate fluctuations via two main channels: a stabilizing aggregate supply effect working through the supply of capital; and a destabilizing aggregate demand effect generated by a feedback loop between unemployment risk and consumption demand. Using the estimated model to measure the contribution of precautionary savings to the propagation of recent recessions, we find strong aggregate demand effects during the Great Recession and the 1990–1991 recession. In contrast, the supply effect at least offset the demand effect during the 2001 recession.
Paper: Precautionary Saving and Aggregate Demand
Last Updated: Mar 12, 2015