In this seminar Chris Perks will provide an overview of his recent paper, The (Ir)relevance of Alternative Savings Mechanisms: Borrowing Constraints and the Durable Goods Co-movement Puzzle. Chris Perks notices in his paper that since the seminal work of Barsky, House and Kimball (2003, 2007), a substantial amount of the durable goods literature has centred on the negative co-movement of durable and non-durable consumption in response to unanticipated changes in monetary policy. This negative co-movement is sharply at odds with the empirical evidence. Recent papers have addressed this discrepancy through the introduction of borrowing constraints (Monacelli 2009). However, it has recently been claimed that the inability of certain types of models with borrowing constraints to improve on generic sticky price models in the generation of positive co-movement in the wake of a monetary policy shock is at least partially attributable to equilibrium in the market for savings (Sterk 2010). Chris’ paper shows that introducing government debt and foreign debt markets and unconstraining the decisions of household savers does not aid the model in the generation of co-movement. Rather, the model’s co-movement properties largely rest on the shadow value of durables as originally proposed by Barsky et al (2007).

Chris Perks is a PhD student in Economics at ANU. His thesis examines durable goods in DSGE models. Chris is also a Senior Economist at the Productivity Commission.

The CAMA Macroeconomics Brown Bag Seminars offer CAMA speakers, in particular PhD students, an opportunity to present their work in progress in front of their peers, and reputable visitors to showcase their work.