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How Institutions Shape the Distributive Impact of Macroeconomic Shocks: A DSGE Analysis

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  • Rudiger Ahrend
  • Charlotte Moeser
  • Tommaso Monacelli

Abstract

This paper examines how the the distributive impact of macroeconomic shocks is shaped by selected institutions. It uses a dynamic stochastic general equilibrium (DSGE) framework with heterogeneous agents and an endogenous collateral constraint. The model is based on the “credit view” of business cycles, where shocks affect the real economy also via their impact on the borrowing capacity of economic agents. In this framework a positive shock to credit spreads, as seen in the recent crisis, redistributes from capital to labour as well as from from equity to bond holders. In contrast, both productivity and inflation shocks redistribute towards capital or equity holders. Distributive impacts are shown to be shaped by institutions. More sophisticated financial markets are found to amplify the redistributive impact of shocks, whereas more flexible wages, a more elastic labour supply, and a more reactive central bank are found to dampen it. Comment les institutions influencent la redistribution liée aux chocs macroéconomiques L'article analyse comment les institutions influencent la redistribution qui résulte des chocs macroéconomiques. Premièrement, l'article propose un modèle à agents hétérogènes en équilibre général à dynamique stochastique où les contraintes de crédit sont endogènes. Les chocs macroéconomiques sont transmis à l'activité économique directement et indirectement, via les contraintes de crédit des agents. Dans ce modèle, un choc positif sur les spreads de crédits, comme lors de la dernière crise, affecte moins les agents détenant du travail que ceux qui détiennent du capital, et affecte moins les agents qui détiennent des obligations que des actions. Au contraire, les agents détenant du travail et des obligations sont plus vulnérables aux chocs inflationnistes et aux chocs de productivité. Deuxièmement, l'article évalue comment les institutions influencent la redistribution liée aux chocs macroéconomiques. La sophistication des marchés financiers apparaît amplifier la redistribution liée aux chocs macroéconomiques, tandis que la flexibilité des salaires, l'élasticité de l'offre de travail et la réactivité des banques centrales, apparaissent limiter celle-ci.

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Bibliographic Info

Paper provided by OECD Publishing in its series OECD Economics Department Working Papers with number 884.

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Date of creation: 21 Jul 2011
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Handle: RePEc:oec:ecoaaa:884-en

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Keywords: shocks; income distribution; institutions; credit frictions; DSGE; heterogeneous agents; agents hétérogènes; chocs macroéconomiques; contraintes de crédit; institutions; distribution des revenus; modèle d'équilibre général à dynamique stochastique;

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