Idiosyncratic income risk and aggregate fluctuations

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• dc.contributor.author Debortoli, Davide
• dc.contributor.author Galí, Jordi, 1961-
• dc.date.accessioned 2024-10-04T08:49:53Z
• dc.date.available 2024-10-04T08:49:53Z
• dc.date.issued 2024
• dc.description.abstract We study how the presence of idiosyncratic income risk affects aggregate fluctuations in the absence of binding borrowing constraints and/or cyclical income risk. Its impact is shown to be captured by the response of a consumption-weighted average of individual consumption risk to aggregate shocks. We analyze two example economies—an endowment economy and a New Keynesian economy—and show that, under plausible calibrations, the impact of idiosyncratic income risk on aggregate fluctuations is quantitatively small since most of the changes in consumption risk are concentrated among poorer (low-consumption) households.
• dc.description.sponsorship We acknowledge the financial support from the European Research Council under the European Union’s Horizon 2020 research and innovation program (Galí, Advanced Grant 882332-HEMPEF), from La Caixa Research Grant on Socioeconomic Wellbeing (Debortoli), from the Spanish Ministry of Science, Innovation and Universities through the Severo Ochoa Programme for Centres of Excellence in R&D (Barcelona School of Economics CEX2019-000915-S) and through grant PID2020-116268GB-I00, and from the Generalitat de Catalunya through CERCA and SGR Programme (2017-SGR-1393). The contribution by Davide Debortoli has been prepared under the Wim Duisenberg Fellowship sponsored by the ECB.
• dc.format.mimetype application/pdf
• dc.identifier.citation Debortoli D, Galí J. Idiosyncratic income risk and aggregate fluctuations. Am Econ J Macroecon. 2024 Oct;16(4):279-310. DOI: 10.1257/mac.20220382
• dc.identifier.doi http://dx.doi.org/10.1257/mac.20220382
• dc.identifier.issn 1945-7707
• dc.identifier.uri http://hdl.handle.net/10230/61317
• dc.language.iso eng
• dc.publisher American Economic Association
• dc.relation.ispartof American Economic Journal: Macroeconomics. 2024 Oct;16(4):279-310
• dc.relation.projectID info:eu-repo/grantAgreement/EC/H2020/882332
• dc.relation.projectID info:eu-repo/grantAgreement/ES/2PE/CEX2019-000915-S
• dc.relation.projectID info:eu-repo/grantAgreement/ES/2PE/PID2020-116268GB-I00
• dc.rights © American Economic Association. Can be found at https://www.aeaweb.org/articles?id=10.1257/mac.20220382.
• dc.rights.accessRights info:eu-repo/semantics/openAccess
• dc.subject.keyword Heterogeneous households
• dc.subject.keyword Economic fluctuations
• dc.subject.keyword Aggregate shocks
• dc.subject.keyword Idiosyncratic shocks
• dc.subject.keyword Monetary policy
• dc.subject.keyword HANK models
• dc.title Idiosyncratic income risk and aggregate fluctuations
• dc.type info:eu-repo/semantics/article
• dc.type.version info:eu-repo/semantics/publishedVersion