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Internal habits formation and optimality (2020)
Journal Article
Bambi, M., & Gozzi, F. (2020). Internal habits formation and optimality. Journal of Mathematical Economics, 91, 165-172. https://doi.org/10.1016/j.jmateco.2020.09.008

In a very influential model with internal habits, Carroll et al., (2017, 2000), establish that an increase in economic growth may cause a positive change in savings. The optimality of this result, and of many other contributions using a similar frame... Read More about Internal habits formation and optimality.

Nominal exchange rate determination and dynamics in an OLG framework (2020)
Journal Article
Bambi, M., & Eugeni, S. (2021). Nominal exchange rate determination and dynamics in an OLG framework. Economic Theory, 72, 93-132. https://doi.org/10.1007/s00199-020-01271-3

The empirical evidence on nominal exchange rate dynamics shows a long-run relationship of this variable with the fundamentals of the economy, although such relationship disappears at shorter horizons. This apparently contrasting behaviour of the nomi... Read More about Nominal exchange rate determination and dynamics in an OLG framework.

Time‐varying consumption tax, productive government spending, and aggregate instability (2019)
Journal Article
Bambi, M., & Venditti, A. (2021). Time‐varying consumption tax, productive government spending, and aggregate instability. International Journal of Economic Theory, 17(2), 190-215. https://doi.org/10.1111/ijet.12216

In this paper we investigate if government balanced‐budget rules together with endogenous taxation may lead to aggregate instability in an endogenous growth framework. After highlighting the differences with the exogenous growth framework, we prove t... Read More about Time‐varying consumption tax, productive government spending, and aggregate instability.

Exchange rates, sunspots and cycles (2018)
Working Paper
Bambi, M., & Eugeni, S. (2018). Exchange rates, sunspots and cycles

The empirical evidence on nominal exchange rate dynamics shows a long-run relationship of this variable with the fundamentals of the economy, although such relationship disappears at shorter horizons (“exchange rate disconnect” puzzle). This apparent... Read More about Exchange rates, sunspots and cycles.

Success, Survive or Escape? Aspirations and Poverty Traps (2017)
Journal Article
Chivers, D. (2017). Success, Survive or Escape? Aspirations and Poverty Traps. Journal of Economic Behavior and Organization, 143, 116-132. https://doi.org/10.1016/j.jebo.2017.09.018

I present a model of occupational choice where an agent decides whether to invest in a project that yields risky returns or a project that yields safe returns. An agent's utility is affected by the presence of an aspiration level which will only be s... Read More about Success, Survive or Escape? Aspirations and Poverty Traps.

Solving Internal Habit Formation Models Through Dynamic Programming in Infinite Dimension (2017)
Journal Article
Augeraud-Veron, E., Bambi, M., & Gozzi, F. (2017). Solving Internal Habit Formation Models Through Dynamic Programming in Infinite Dimension. Journal of Optimization Theory and Applications, 173(2), 584-611. https://doi.org/10.1007/s10957-017-1073-8

In this paper, we study an economic model, where internal habits play a role. Their formation is described by a more general functional form than is usually assumed in the literature, because a finite memory effect is allowed. Indeed, the problem bec... Read More about Solving Internal Habit Formation Models Through Dynamic Programming in Infinite Dimension.

Employment-based health insurance and misallocation: Implications for the macroeconomy (2016)
Journal Article
Chivers, D., Feng, Z., & Villamil, A. (2017). Employment-based health insurance and misallocation: Implications for the macroeconomy. Review of Economic Dynamics, 23, 125-149. https://doi.org/10.1016/j.red.2016.09.002

Most working-age Americans obtain health insurance through the workplace. U.S. law requires employers to use a common price, but the value of insurance varies with idiosyncratic health risk. Hence, linking employment and health insurance creates a we... Read More about Employment-based health insurance and misallocation: Implications for the macroeconomy.

Generically distributed investments on flexible projects and endogenous growth (2015)
Journal Article
Bambi, M., Di Girolami, C., Federico, S., & Gozzi, F. (2017). Generically distributed investments on flexible projects and endogenous growth. Economic Theory, 63(2), 521-558. https://doi.org/10.1007/s00199-015-0946-z

In this paper we study an endogenous growth model where investments are (generically) distributed over multi-period flexible projects leading to new capital once completed. Recently developed techniques in dynamic programming are adapted and used to... Read More about Generically distributed investments on flexible projects and endogenous growth.

Time-to-build and the capital structure (2015)
Journal Article
Bambi, M. (2015). Time-to-build and the capital structure. Economics Letters, 137, 222-225. https://doi.org/10.1016/j.econlet.2015.11.012

Calibrating the time-to-build parameter in one-sector models is non-trivial because capital includes plant, equipment, etc. having different gestation lags. This issue is clarified by explaining when the long-run dynamics of these models matches that... Read More about Time-to-build and the capital structure.

Fearing the worst: the importance of uncertainty for inequality (2015)
Journal Article
Blackburn, K., & Chivers, D. (2015). Fearing the worst: the importance of uncertainty for inequality. Economic Theory, 60(2), 345-370. https://doi.org/10.1007/s00199-015-0876-9

We present an overlapping generations model in which aspirational agents face uncertainty about the returns to human capital investment. This uncertainty implies the prospect that aspirations will not be fulfilled, the probability of which is greater... Read More about Fearing the worst: the importance of uncertainty for inequality.

Endogenous growth with addictive habits (2014)
Journal Article
Augeraud-Veron, E., & Bambi, M. (2015). Endogenous growth with addictive habits. Journal of Mathematical Economics, 56, 15-25. https://doi.org/10.1016/j.jmateco.2014.11.002

In this paper, we investigate the global dynamics of an endogenous growth model with linear technology and addictive habits. We find feasible parameters’ conditions under which: (a) the resulting equilibrium consumption path is steeper than in a stan... Read More about Endogenous growth with addictive habits.

Endogenous growth and wave-like business fluctuations (2014)
Journal Article
Bambi, M., Gozzi, F., & Licandro, O. (2014). Endogenous growth and wave-like business fluctuations. Journal of Economic Theory, 154, 68-111. https://doi.org/10.1016/j.jet.2014.08.004

This paper argues that observed long lags in innovation implementation rationalize Schumpeter's statement that “wave-like fluctuations in business ... are the form economic development takes in the era of capitalism.” Adding implementation delays to... Read More about Endogenous growth and wave-like business fluctuations.

Optimal policy and consumption smoothing effects in the time-to-build AK model. (2010)
Journal Article
Bambi, M., Fabbri, G., & Gozzi, F. (2012). Optimal policy and consumption smoothing effects in the time-to-build AK model. Economic Theory, 50(3), 635-669. https://doi.org/10.1007/s00199-010-0577-3

In this paper, the dynamic programming approach is exploited in order to identify the closed loop policy function, and the consumption smoothing mechanism in an endogenous growth model with time to build, linear technology and irreversibility constra... Read More about Optimal policy and consumption smoothing effects in the time-to-build AK model..

Endogenous growth and time-to-build: The AK case (2007)
Journal Article
Bambi, M. (2008). Endogenous growth and time-to-build: The AK case. Journal of Economic Dynamics and Control, 32(4), 1015-1040. https://doi.org/10.1016/j.jedc.2007.04.002

In this paper, a continuous time AK model is fully analyzed under the time-to-build assumption. The existence and uniqueness of a (real) balanced growth path as well as oscillatory convergence are proved. Transversality conditions and capital depreci... Read More about Endogenous growth and time-to-build: The AK case.