Macroeconomics

1. Use SCF2004 to compute household's wealth. Compute the the US household's mean wealth and Gini coefficient. List all variables that you use to compute household's wealth.

2. Suppose the income becomes least persistent in the Bewley model. i.e. ρ decreases. Use the given Matlab code in Lecture 12 and choose a ρ ≥ 0.9 to do the following:

(a) Compute the new equilibrium interest rate r, wealth Gini, and consumption Gini.

(b) Does r increase/decrease if ρ decrease? Can you provide the theoretical intuition to address this change?

(c) Does wealth Gini match data better/worse if ρ decrease? Can you provide the theoretical intuition to address this change?

3. Suppose the income becomes more volatile in the Aiyagari model. i.e. σ increases. Use the given Matlab code in Lecture 13 and choose a σ ≥ 0.06 to do the following:

(a) Compute the new equilibrium interest rate r, wage w, wealth Gini, and consumption Gini.
(b) Do r and w increase/decrease if σ decrease? Can you provide the theoretical intuition to address this change?
(c) Does wealth Gini match data better/worse if σ decrease? Can you provide the theoretical intuition to address this change?

4. We know Bewley-Aiyagari Models can not match the US wealth Gini coefficient. Make two possible suggestions, beside the changes on ρ and σ, so these models can generate higher wealth Gini. Provide your intuitions.