About 120 economists from all over the world - including Canada, Chile, France, Israel, Italy, Japan, Spain, and the United Kingdom - met in Cambridge on July 18 for the summer research meeting of the NBER's Program on Economic Fluctuations and Growth. In addition to academic economists, central bankers from many of the represented countries participated in the day's discussions. Organizers Olivier J. Blanchard of NBER and Harvard University and Thomas J. Sargent of NBER and Stanford University chose the following topics for discussion:
Patrick Kehoe, NBER and Federal Reserve Bank of Minneapolis and Fabrizio Perri, University of Pennsylvania, "International Business Cycles With Endogenous Incomplete Markets"
Discussant: Urban Jermann, NBER and University of Pennsylvania
David I. Laibson, NBER and Harvard University; Andrea Repetto, Universidad de Chile; and Jeremy Tobacman, Harvard University, "Self-Control and Retirement Savings"
Discussant: Lars P. Hansen, NBER and University of Chicago
Jason G. Cummins, New York University; Kevin A. Hassett, American Enterprise Institute; and Stephen D. Oliner, Federal Reserve Board, "Investment Behavior, Observable Expectations, and Internal Funds"
Discussant: Owen Lamont, NBER and University of Chicago
Susanto Basu, NBER and University of Michigan, and David N. Weil, NBER and Brown University, "Appropriate Technology and Growth" (NBER Working Paper No. 5865)
Discussant: Per Krussell, University of Rochester
Harold L. Cole and Narayana Kocherlakota, Federal Reserve Bank of Minneapolis, "Efficient Allocations with Hidden Income and Hidden Storage"
Discussant: Fernando Alvarez, University of Pennsylvania
Ricardo J. Caballero, NBER and MIT, and Mohamad L. Hammour, Capital Guidance, "Improper Churn: Social Costs and Macroeconomic Consequences"
Discussant: Robert B Hall, NBER and Stanford University
Earlier research has shown that standard models with complete markets generate cross-country correlations of consumption that are much higher than those in the data and cross-correlations of output and factor inputs that are much lower than those in the data. Kehoe and Perri introduce a particular type of friction in the international credit market - that international loans are not perfectly enforceable, in that any country can renege on its outstanding debts and suffer the associated penalties on future borrowing - and ask whether it can help to account quantitatively for these anomalies. They find that these types of frictions, in contrast to the exogenous restriction on the asset markets, can go a long way in helping to resolve some of the outstanding anomalies in the data.
Laibson, Repetto, and Tobacman calibrate a model that unifies the literature on hyperbolic discounting and on buffer stocks. They show that life-cycle consumption and asset accumulation patterns are consistent with the hyperbolic model. Hyperbolic consumers will react more favorably than exponential consumers to a stylized defined-contribution pension plan. Benchmark simulations (with a coefficient of relative risk aversion of 1 and a measured elasticity of intertemporal substitution between . …