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Convex Analysisの二,三の進展について

Hyperbolic discount functions induce dynamically inconsistent preferences, implying a motive for consumers to constrain their own future choices. This paper analyzes the decisions of a hyperbolic consumer who has access to an imperfect commitment technology: an illiquid asset whose sale must be initiated one period before the sale proceeds are received. The model predicts that consumption tracks income, and the model explains why consumers have asset-specific marginal propensities to consume. The model suggests that financial innovation may have caused the ongoing decline in U. S. savings rates, since financial innovation in- creases liquidity, eliminating commitment opportunities. Finally, the model implies that financial market innovation may reduce welfare by providing âtoo muchâ liquidity.

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Golden Eggs and Hyperbolic Discounting

This paper discusses the discounted utility (DU) model: its historical development, underlying assumptions, and "anomalies" - the empirical regularities that are inconsistent with its theoretical predictions. We then summarize the alternate theoretical formulations that have been advanced to address these anomalies. We also review three decades of empirical research on intertemporal choice, and discuss reasons for the spectacular variation in implicit discount rates across studies. Throughout the paper, we stress the importance of distinguishing time preference, per se, from many other considerations that also influence intertemporal choices.

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Time Discounting and Time Preference: A Critical Review

We construct estimates of external assets and liabilities for 145 countries for the period 1970-2004. We describe our estimation methods and present key features of the data at the country and the global level. We focus on trends in net and gross external positions, and the composition of international portfolios, distinguishing between foreign direct investment, portfolio equity investment, official reserves, and external debt. We document the increasing importance of equity financing and the improvement in the external position for emerging markets, and the differing pace of financial integration between advanced and developing economies. We also show the existence of a global discrepancy between estimated foreign assets and liabilities, and identify the asset categories that account for this discrepancy.

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The External Wealth of Nations Mark Ii: Revised and Extended Estimates of Foreign Assets and Liabilities, 1970-2004

This paper undertakes an assessment of a rapidly growing body of economic research on financial literacy. We start with an overview of theoretical research which casts financial knowledge as a form of investment in human capital. Endogenizing financial knowledge has important implications for welfare as well as policies intended to enhance levels of financial knowledge in the larger population. Next, we draw on recent surveys to establish how much (or how little) people know and identify the least financially savvy population subgroups. This is followed by an examination of the impact of financial literacy on economic decision-making in the United States and elsewhere. While the literature is still young, conclusions may be drawn about the effects and consequences of financial illiteracy and what works to remedy these gaps. A final section offers thoughts on what remains to be learned if researchers are to better inform theoretical and empirical models as well as public policy.

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The Economic Importance of Financial Literacy: Theory and Evidence

This paper explores the implications of precautionary saving and life cycle behavior for business cycle fluctuations. Existing heterogenous agent models of the business cycle, with labor income uncertainty and incomplete markets, yield aggregate quantitative predictions that are almost indistinguishable from their representative agent counterpart. This 'quasi' aggregation theorem arises when idiosyncratic shocks are largely transitory. This paper revisits these results in the context of an overlapping generations model with two sources of heterogeneity: age and idiosyncratic shocks to labor income. Surprisingly, even with permanent labor income shocks and finite lives, the previous results are shown to hold: aggregate dynamics are fully characterized by the evolution of the aggregate capital stock. The implications for welfare and risk sharing are derived.

Precautionary Savings, LifeCycle and Macroeconomics

This paper surveys the recent empirical and theoretical literature on valuation effects. The increase in cross-border holdings of financial assets opens the door to significant adjustments in a country’s external position in response to fluctuations in asset and currency prices. Access to better data on net and gross international investment positions for a broad range of countries permits careful measurement of these ‘valuation effects’. We distinguish between predictable and unpredictable valuation effects, and argue that they play separate roles in the adjustment process (for better or for worse). Finally, we discuss theoretical conditions under which predictable valuation effects can arise in equilibrium.

Valuation Effects and External Adjustment: a Review ∗

A critical question for emerging-market policymakers is how to adjust to monetary policy changes in the center. A core tenet of modern macroeconomic theory is that countries should let their exchange rate float when financial conditions abroad change. This allows the nominal and real exchange rates to absorb the brunt of the required adjustment. This is the standard Mundell-Fleming prescription for floating exchange rates. Accordingly when the U.S. Federal Reserve tightens its policy a country like Chile should let its currency depreciate. Under. the standard analysis the Fed tightening slows down economic activity in the U.S. thus depressing the demand for Chilean exports. The depreciation of the peso offsets partly or even fully this negative impulse thus helping to prop up the Chilean economy.

Monetary policy transmission in emerging markets: an application to Chile

We propose a new explanation for the forward-premium and the delayed-overshooting puzzles Both puzzles arise from a systematic under-reaction of short-term interest rate forecasts to current innovations Accordingly, the forward premium is always a biased predictor of future depreciation; the bias can be so severe as to lead to negative coefficients in the ‘Fama’ regression; delayed overshooting may or may not occur depending upon the persistence of interest rate innovations and the degree of under-reaction; lastly, for G-7 countries against the US, these puzzles can be rationalized for values of the model's parameters that match empirical estimates

Exchange Rate Dynamics, Learning and Misperception

Currency fluctuations provide a substantial source of movements in relative prices that is largely exogenous to the firm. This paper evaluates empirically and theoretically the importance of exchange rate movements on job reallocation across and within sectors. The objective is (1) to provide accurate estimates of the impact of exchange rate fluctuations and (2) to further our understanding of how reallocative shocks propagate through the economy. The empirical results indicate that exchange rates have a significant effect of gross and net job flows in the traded goods sector. Moreover, the paper finds that job creation and destruction comove positively, following a real exchange rate shock. Appreciations are associated with additional turbulence, and depreciations with a existing non-representative agent reallocation models have a hard time replicating the salient features of the data. The results indicate a strong tension between the positive comovements of gross flows in response to reallocative disturbances and the negative comovement in response to aggregate shocks.

Pierre-Olivier Gourinchas

Papers

Precautionary Savings, LifeCycle and Macroeconomics

Valuation Effects and External Adjustment: a Review ∗

Monetary policy transmission in emerging markets: an application to Chile

Exchange Rate Dynamics, Learning and Misperception

Exchange Rates and Jobs: What Do We Learn from Job Flows?