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A dynamic new Keynesian life-cycle model: Societal aging, demographics, and monetary policy

  • Fujiwara, Ippei
  • Teranishi, Yuki

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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Article provided by Elsevier in its journal Journal of Economic Dynamics and Control.

Volume (Year): 32 (2008)
Issue (Month): 8 (August)
Pages: 2398-2427

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Handle: RePEc:eee:dyncon:v:32:y:2008:i:8:p:2398-2427
Contact details of provider: Web page: http://www.elsevier.com/locate/jedc

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