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 Research Focus

Our research comprises both theoretical studies in the field of dynamic general equilibrium theory as well as projects with a more applied focus such as economic models of climate change and Social Security systems. Following is a list of our present and past research projects.


Macroeconomic Models of Climate Change

Climate change is a global threat requiring a coordinated effort of all nations to significantly and permanently reduce their emissions. Our research studies this problem based on the dynamic general equilibrium paradigm in a framework with multiple countries or regions. Such a multi-region model permits to incorporate various important sources of regional heterogeneity into the analysis which is required to understand the incentives for different regions to implement alternative climate policies. A first set of papers in this project developed a theoretical framework with these features to analyze the existence and properties of (first-best) optimal climate policies. In our current research project „Cooperation, Efficiency, and Stability of Climate Agreements in Macroeconomic Models of Climate Change“ we aim to extend these results to non-cooperative situations using game-theoretic methods and to study the existence and form of optimal climate policies in the absence of global cooperation and their consequences for the economy and the environment.


Dynamic General Equilibrium Theory

This research project studies the existence and properties of two important classes of dynamic equilibria. First, recursive equilibria on a minimal state space (Markov equilibria), which play an important role in both the theory and the computation of dynamic equilibrium. Second, equilibria along which an asset bubble occurs (bubbly equilibria), which are important for understanding when and why bubbles emerge on financial markets. Bubbly equilibria have important policy applications such as the sustainability and optimal risk structure of governmental debt. Our current research studies these issues within a large class of stylized OLG models with stochastic production. A central goal of future research is to extend the results to OLG economies with multiperiod-lived consumers for which very few theoretical results exist in the literature. Such an extension also allows for a finer time-scale of these models thereby greatly enhancing their applicability.


Financial Markets and the Macroeconomy

The past financial crises emphasized the importance of financial markets for the macroeconomy. The common theme of our research in this project is to obtain a better understanding of the behavior of financial markets and their interactions with the real economy. Our earlier contributions analyze the dynamics of asset markets with heterogeneous consumers who differ with respect to their expectations and/or the length of their planning horizons. In more recent papers, we study the interactions between housing prices and the credit market and the conditions under which asset bubbles can cause an investment boom in the economy. One aim of our future research in this field is to incorporate a banking sector and various types of frictions in the analysis which played a major role in past financial crises.


Social Security and Demographic Change

The accelerating demographic change poses a challenge for the existing Social Security systems in most industrialized countries. Our research in this field studies the optimal size of Social Security systems and their impact on growth, employment, asset prices, and consumer welfare. Different welfare concepts that incorporate the trade-off between the interests of different generations have been developed and applied to stylized OLG economies where optimal Social Security policies can be computed explicitly. One goal of our future research is to broaden these concepts and apply them to large-scale OLG models with calibrated parameters and realistic demographic changes in order to provide policy guidance how the consequences of demographic change can be attenuated. 


Archive of Prof. Dr. Landmann's Research


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