Nick Lei Guo
Associate Professor of Economics
On Faculty since 2018
- Areas of Expertise
- Professional Affiliations
- Selected Publications
Dr. Guo’s research lies in macroeconomics, financial economics, and public economics. Much of Dr. Guo’s current research involves examining households’ consumption, saving, portfolio, education, and bequest decisions over the life cycle, and how these decisions are affected by government policies. He has published his results in Review of Economic Dynamics, Journal of Mathematical Economics, Macroeconomic Dynamics, Mathematical Economics Letters, Journal of Economic Education, and Economic Research Journal. He also has several working papers and many in progress.
University of Minnesota
Ph.D., Economics, 2010
M.A., Economics, 2004
B.A., Economics, 2001
B.S., Mathematics, 2001
- Financial Economics
- Public Economics
- American Economic Association : Member
- Association for Comparative Economic Studies : Member
- Econometric Society : Member
- Western Economic Association International : Member
Fall 2017 Midwest Macroeconomics Meetings
Nov, 2017, Pittsburgh, PA,
Annual Midwest Economic Research Group Meeting
Aug, 2017, Madison, WI
Spring 2017 Midwest Macroeconomics Meetings
May, 2017, Baton Rouge, LA
Fall 2016 Midwest Macroeconomics Meetings
Nov, 2016, Kansas City, KS
5th Midwest Applied Time Series Econometrics Group Meeting
Aug, 2016, Minneapolis, MN
Policy Uncertainty and Bank Bailouts, Journal of Financial Markets
Frank N. Caliendo, Nick L. Guo, and Jason M. Smith, 2018
We model the effect of bank bailouts on portfolio choices and welfare. Banks sell bonds to leverage investment in risky projects and households buy bonds under rational expectations about default risk. Bailouts induce greater leverage but reduce equilibrium interest rates. The interest rate effect dominates the leverage effect and bailouts lead to fewer bank failures. Bailouts are efficient but not Pareto optimal: bailouts increase social welfare by mitigating uninsurable risk, which helps banks but hurts households since the insurance gains are not worth the price households must pay to finance the bailout.
Social security is NOT a substitute for annuity markets, Review of Economic Dynamics
Frank N. Caliendo, Nick L. Guo, Roozbeh Hosseini, 2014
Common wisdom suggests that a fully-funded actuarially fair social security system should increase welfare when households face longevity risk and annuity markets are missing. This wisdom is based on the observation that social security pays benefits as life annuities and therefore appears to complete the market. However, we argue that common wisdom is based on a benefit-only analysis that ignores a fundamental cost—social security crowds out the bequests that households leave (and receive) in general equilibrium. We conduct a general equilibrium cost-benefit analysis of the longevity insurance role of social security, and we show that under certain conditions this decline in bequest income offsets any possible gains from access to a public annuity pool. We abstract from distortions to national income and factor prices to show that the equilibrium bequest channel is all that is needed to reach this conclusion.
Time-inconsistent preferences and time-inconsistent policies, Journal of Mathematical Economics
Nick L. Guo, Frank N. Caliendo, 2014
Social security is commonly viewed as a commitment device for hyperbolic consumers. We argue that such common intuition is not consistent with formal economic theory. In a model where the government can choose either time-consistent or time-inconsistent policies to govern its social security arrangement and credit markets are complete, only a time-inconsistent policy achieves true commitment by hyperbolic consumers. This rules out a traditional social security program as a commitment device.
Demystifying Financial Markets for Saving and Insurance with Numerical Models, The Journal of Economic Education
Nick L. Guo & John Gilbert, 2014
How do people make choices over time and in the face of uncertainty? Moreover, how do financial markets help people make choices that improve their economic well-being given their income streams over time, their patience or lack thereof, their tolerance for risk, and the uncertainties that they face? These are fundamental questions lying at the heart of much of modern microeconomics, macroeconomics, and, of course, financial economics.
Roosevelt and Prescott come to an agreement, Macroeconomic Dynamics
Frank N. Caliendo and Nick L. Guo, 2014
Edward C. Prescott has argued that mandatory saving is socially desirable because it solves the problem of people intentionally free riding and becoming a welfare burden. Inspired by Prescott's argument, we develop a model in which rational individuals choose between saving and free riding. We find that free riding is a robust outcome for a significant share of the population and that everyone, including the free riders, benefits from the elimination of free riding through mandatory saving. Our results strengthen Prescott's position that free riding is a serious problem and that mandatory saving is socially desirable.
Optimal Control Problems with State Specific Jumps in the State Equation, Mathematical Economics Letters
Frank N. Caliendo, Nick L. Guo, 2014
An important class of control problems in economics are those in which the state equation switches (jumps) whenever the state variable crosses a threshold. An example is a life-cycle problem in which a household faces higher rates on borrowing than on lending, and therefore the interest rate on the household's asset balance switches discretely each time the asset balance switches signs . The existing method for solving such a problem is notoriously difficult to compute because the first-order conditions include a continuum of complementary slackness conditions. In this paper we provide an easy solution method that utilizes the standard Maximum Principle for unconstrained optimization problems. No inequality constraints (and therefore no complementary slackness conditions) are required.