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LiquidHouseCycle SIGNED

A Unified Framework of Business Cycles and Household Portfolios: Income Risks, Asset Liquidity, and Inequality

Total Cost €

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EC-Contrib. €

0

Partnership

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 LiquidHouseCycle project word cloud

Explore the words cloud of the LiquidHouseCycle project. It provides you a very rough idea of what is the project "LiquidHouseCycle" about.

determinant    household    repercussions    big    historical    implications    summarize    funds    assets    theoretical    overlapping    shocks    empirical    modo    first    income    idiosyncratic    self    portfolios    setup    economic    cycle    generations    asset    endogenous    models    dynamics    document    aggregate    liquid    insure    disregarded    crises    debt    housing    cycles    cyclical    risky    policies    fiscal    demand    time    choices    understand    recession    interact    markets    policy    create    goods    incomplete    business    last    times    portfolio    movements    investments    grosso    nominal    redistributes    stabilization    framework    firm    augment    positions    inequality    model    develops    nexus    households    severe    questions    safe    fluctuations    monetary    someone    macroeconomic    invest    standard    liquidity    consume    itself    else    wealth    uses    investment    rigidities    savings    illiquid    structure    risks    freeze    array    unison    propagation   

Project "LiquidHouseCycle" data sheet

The following table provides information about the project.

Coordinator
RHEINISCHE FRIEDRICH-WILHELMS-UNIVERSITAT BONN 

Organization address
address: REGINA PACIS WEG 3
city: BONN
postcode: 53113
website: www.uni-bonn.de

contact info
title: n.a.
name: n.a.
surname: n.a.
function: n.a.
email: n.a.
telephone: n.a.
fax: n.a.

 Coordinator Country Germany [DE]
 Total cost 1˙277˙830 €
 EC max contribution 1˙277˙830 € (100%)
 Programme 1. H2020-EU.1.1. (EXCELLENT SCIENCE - European Research Council (ERC))
 Code Call ERC-2016-COG
 Funding Scheme ERC-COG
 Starting year 2017
 Duration (year-month-day) from 2017-06-01   to  2022-05-31

 Partnership

Take a look of project's partnership.

# participants  country  role  EC contrib. [€] 
1    RHEINISCHE FRIEDRICH-WILHELMS-UNIVERSITAT BONN DE (BONN) coordinator 1˙277˙830.00

Map

 Project objective

Households face large idiosyncratic income risks and use their wealth to self insure. In doing so, they make portfolio choices we can summarize grosso modo as choices between liquid (safe and nominal) and illiquid (risky and real) assets. These choices have the potential to create strong aggregate repercussions as investments in real assets create an immediate demand for goods, while liquid nominal savings only when someone else uses the funds to invest or consume. As a result, portfolio choices are key for economic dynamics and important for the propagation of monetary and fiscal policy. Moreover, household portfolio positions and the liquidity of assets itself become an important determinant of aggregate savings and investment. Yet, they are widely disregarded in standard business cycle models today. The proposed research therefore develops a novel framework that allows us to understand this nexus--a framework that studies business cycles, household portfolios, income risks, and asset liquidity in unison. This new framework allows us to address a wide array of important macroeconomic questions of our time: how wealth inequality and stabilization policies interact, how monetary policy redistributes, how a housing freeze can create a recession as big as the last one, and finally, why crises are particularly severe in times of high household debt. To develop this framework, empirical and theoretical work has to go hand in hand: First, I document the historical movements in the distribution of household (and firm) portfolios to understand how and whose portfolio positions change over the cycle and in response to shocks. Second, I document the cyclical movements in asset liquidity. Third, I develop a theoretical framework that allows us to understand the implications of changes in asset liquidity in a setup with incomplete markets and nominal rigidities. Finally, I make liquidity fluctuations endogenous and augment the model with a structure of overlapping generations.

 Publications

year authors and title journal last update
List of publications.
2020 Christian Bayer, Ralph Luetticke, Benjamin Born
Shocks, Frictions, and Inequality in US Business Cycles
published pages: , ISSN: , DOI:
2020-02-13
2018 Christian Bayer, Ralph Luetticke
Solving heterogeneous agent models in discrete time with many idiosyncratic states by perturbation methods
published pages: , ISSN: , DOI:
2019-05-16

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