Inequality and Business Cycles

Florin Bilbiie, Giorgio Primiceri and Andrea Tambalotti

Janeway Institute Working Papers from Faculty of Economics, University of Cambridge

Abstract: We quantify the connection between inequality and business cycles in a medium-scale New Keynesian model with tractable household heterogeneity, estimated with aggregate and cross-sectional data. We find that inequality substantially amplifies cyclical fluctuations. The primary source of this amplification is cyclical precautionary saving behavior. Savers reduce their consumption to insure themselves against the idiosyncratic risk of large income drops, which rises in recessions.

Date: 2022-12-16
New Economics Papers: this item is included in nep-dge
Note: fob21
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.janeway.econ.cam.ac.uk/working-paper-pdfs/jiwp2234.pdf

Related works:
Working Paper: Inequality and Business Cycles (2023)
Working Paper: Inequality and Business Cycles (2023)
Working Paper: Inequality and Business Cycles (2022)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cam:camjip:2234

Access Statistics for this paper

More papers in Janeway Institute Working Papers from Faculty of Economics, University of Cambridge
Bibliographic data for series maintained by Jake Dyer ().