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Essays in dynamic macroeconomics.


Description

In Chapter 1 we build a dynamic stochastic general equilibrium model where the property of the capital stock in the economy replicates the concentration observed in US data. We investigate the business cycle consequences of such a property structure, coupled with segmentation on the labor market. For some parametrizations, we are able to characterize the equilibrium allocation analytically. From the closed-form solution it clearly emerges that the composition, between labor income and return on capital, of the agents' income has important consequences at business cycle frequencies. In particular, it contributes to reducing the volatility of aggregate output and investment. We also take advantage of the analytic solution and evaluate the numerical accuracy of two common computational algorithms in approximating the exact solution. We conclude that the popular log-linearization method is very accurate.