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A Dynamic New Keynesian Life-Cycle Model: Societal Ageing, Demographics and Monetary Policy

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  • Ippei Fujiwara

    (Director and Senior Economist, Institute for Monetary and Economic Studies, Bank of Japan (E-mail: ippei.fujiwara@boj.or.jp))

  • Yuki Teranishi

    (Bank of Japan and Columbia University (E-mail: yt2153@columbia.edu))

Abstract

In this paper, we first construct a dynamic new Keynesian model that incorporates life-cycle behavior a la Gertler (1999), in order to study whether structural shocks to the economy have asymmetric effects on heterogeneous agents, namely workers and retirees. We also examine whether considerations of life-cycle and demographic structure alter the dynamic properties of the monetary business cycle model, specifically the degree of amplification in impulse responses. According to our simulation results, shocks indeed have asymmetric impacts on different households and the demographic structure does alter the size of responses against shocks by changing the degree of the trade-off between substitution and income effects.

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Bibliographic Info

Paper provided by Institute for Monetary and Economic Studies, Bank of Japan in its series IMES Discussion Paper Series with number 07-E-04.

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Date of creation: Mar 2007
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Handle: RePEc:ime:imedps:07-e-04

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Keywords: Heterogenous Agents; Life-Cycle; New Keynesian Model;

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Cited by:
  1. Patrick A. Imam, 2013. "Shock from Graying," IMF Working Papers 13/191, International Monetary Fund.
  2. Tobias Kitlinski & Torsten Schmidt, 2011. "The Forecasting Performance of an Estimated Medium Run Model," Ruhr Economic Papers 0301, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  3. Rod Tyers & Jenny Corbett, 2011. "Japan's Economic Slowdown and its Global Implications: A Review of the Economic Modelling," Economics Discussion / Working Papers 11-19, The University of Western Australia, Department of Economics.

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