Working papers
We prove the existence of a Ramsey equilibrium with positive capital tax. We show that the optimal public debt response crucially depends on the persistence of the public spending shock.
@techreport{LR:22b,
author={LeGrand, François and Ragot, Xavier},
institution={SciencesPo},
month={April},
title={Should we Increase or Decrease Public Debt? Optimal Fiscal Policy with Heterogeneous Agents},
type={Working {P}aper},
year={2023}}
We derive optimal monetary and fiscal policies in a HANK model. With taxes on capital and labor, there is no redistributive role for monetary policy. With missing capital tax, inflation still has a quantitative modest role.
@techreport{LMR:21,
author={LeGrand, François and Martin-Baillon, Alaïs and Ragot, Xavier},
institution={SciencesPo},
month={December},
title={Should Monetary Policy Care About Redistribution? Optimal Fiscal and Monetary Policy with Heterogeneous Agents},
type={Working {P}aper},
year={2022}}
We document public welfare spending as an important growth driver of FinTech lending.
@techreport{ADL:22,
author={Alperovych, Yan and Divakaruni, Anantha and LeGrand, François},
institution={emlyon business school},
month={August},
title={Fintech Lending Under Austerity},
type={Working {P}aper},
year={2022}}
We propose a recursive utility specification that can be used in lifecycle models. We present an application to epidemics: Covid-19 and the 1918 influenza.
@techreport{BLH:21,
author={Bommier, Antoine and LeGrand, François and Harenberg, Daniel},
institution={ETH Zurich},
month={July},
title={Recursive Preferences and the Value of Life. Theory and Application to Epidemics},
type={Working {P}aper},
year={2022}}
We compute the Ramsey policies using the truncation method and compare its outcomes to those of other solution techniques. The truncation approach delivers quantitatively accurate estimates of actual optimal policies and we document the presence of a time-inconsistency problem specific to incomplete-market economies in Ramsey problems.
@techreport{LR:22a,
author={LeGrand, François and Ragot, Xavier},
institution={SciencesPo},
month={May},
title={Optimal Policies with Heterogeneous Agents: Truncation and Transitions},
type={Working {P}aper},
year={2022}}
To distinguish between the role of preferences and technologies in the differences in fiscal systems among countries, we derive a methodology to identify the Social Welfare Function (SWF) of a government. The SWF mostly affects the optimal steady-state fiscal system and equilibrium inequality.
@techreport{BHLO:22,
author={LeGrand, François and Ragot, Xavier and Rodrigues, Diego},
institution={SciencesPo},
month={April},
title={The Welfare of Nations: Do Social Preferences Matter for the Macroeconomy?},
type={Working {P}aper},
year={2022}}
We analyze the role of risk aversion in a life cycle model featuring several risks. Risk aversion is shown to contribute to explain the annuity puzzle.
@techreport{BHLO:22,
author={Bommier, Antoine and Harenberg, Daniel and LeGrand, François and O’Dea, Cormac},
institution={ETH Zurich},
month={March},
title={Recursive Preferences, the Value of Life, and Household Finance},
type={Working {P}aper},
year={2022}}
We propose a stochastic volatility model for crude oil markets that features a regime-switching price of variance-risk. While preserving tractability, this model allows us to capture the episodes of negative and positive variance risk premium.
@techreport{LS:22,
author={LeGrand, François and Schneider, Lorenz},
institution={emlyon business school},
month={January},
title={The Variance Risk Premium in Crude Oil Futures Markets: Incorporating the OVX Time Series in a Stochastic Volatility Model},
type={Working {P}aper},
year={2022}}
We uncover using an indirect inference method individual financial market participations from individual consumption data and asset prices. The estimated participations are very close to those reported in the Survey of Consumer Finances and proced to be relevant information for macro and asset pricing.
@techreport{CGL:21,
author={Czellar, Veronika and Garcia, René and LeGrand, François},
institution={emlyon business school},
month={December},
title={Uncovering Asset Market Participation from Household Consumption and Income},
type={Working {P}aper},
year={2021}}
We discuss and propose recursive utility specifications that can be used to properly study the value of life.
@techreport{BHL:21,
author={Bommier, Antoine and Harenberg, Daniel and LeGrand, François},
institution={ETH Zurich},
month={January},
title={Recursive Preferences and the Value of Life: A Clarification},
type={Working {P}aper},
year={2021}}
We present a truncation theory in the space of idiosyncratic histories for heterogeneous agent models. This allows us to solve for Ramsey programs. We study the optimal level of unemployment insurance.
@techreport{LR:20a,
author={LeGrand, François and Ragot, Xavier},
institution={SciencesPo},
month={February},
title={Interest Rate and Existence of Stationary Equilibria in Incomplete Insurance-Market Economies},
type={Working {P}aper},
year={2020}}
We show that the only Kreps and Porteus (1978) preferences which are both stationary and monotone are Uzawa preferences and risk-sensitive preferences. We also extend our results to smooth recursive ambiguity models à la Hayashi and Miao (2011).
@techreport{BL:14,
author={Bommier, Antoine and LeGrand, François},
institution={ETH Zurich},
month={September},
title={A Robust Approach to Risk Aversion},
year={2014}}
We quantify the impacts of imposing no-arbitrage restrictions to a Nelson and Siegel model.
@techreport{L:08,
author={LeGrand, François},
institution={Paris School of Economics},
month={February},
title={Nelson and Siegel, No-Arbitrage and Risk Premium},
type={Working {P}aper},
year={2008}}
Publications
Penultimate working paper versions of publications are linked.
In a lifecycle recursive utility model, risk and ambiguity aversion are shown to reduce annuity demand and enhance bond holdings.
@article{ABL:21,
author={André, Eric and Bommier, Antoine and LeGrand, François},
journal={Journal of Risk and Uncertainty},
month={August},
pages={33-56},
title={The Impact of Risk Aversion and Ambiguity Aversion on Annuity and Saving Choices},
volume={65},
year={2022}}
We present a refinement of truncation method that allows one to consider history sizes of different length. The refined truncation improves the accuracy of the uniform truncation.
@article{LR:22,
author={LeGrand, François and Ragot, Xavier},
journal={Annals of Economics and Statistics},
month={June},
pages={65-91},
title={Refining the Truncation Method to Solve Heterogeneous-Agent Models},
volume={146},
year={2022}}
We present a truncation theory in the space of idiosyncratic histories for heterogeneous agent models. This allows us to solve for Ramsey programs. We study the optimal level of unemployment insurance along the business cycle.
@article{LR:21b,
author={LeGrand, François and Ragot, Xavier},
journal={International Economic Review},
month={February},
number={1},
pages={511-540},
title={Managing Inequality over Business Cycles: Optimal Policies with Heterogeneous Agents and Aggregate Shocks},
volume={63},
year={2022}}
We provide a tractable framework featuring endogenous default and incomplete market, where the equilibrium can be fully analyzed. A world fund is shown to be able to improve aggregate welfare.
@article{LR:21,
author={LeGrand, François and Ragot, Xavier},
journal={Journal of International Economics},
month={July},
pages={103462},
title={Sovereign Default and Liquidity: The Case for a World Safe Asset},
volume={131},
year={2021}}
We study systemic risk in an interbank market, employing an explicit axiomatization inspired by Eisenberg and Noe (2001) and Rogers and Veraart (2013). We characterize the smallest (in the sense of inclusion) set of ex-post defaulting firms.
@article{HJL:20,
author={Houy, Nicolas and Jouneau-Sion, Frédéric and LeGrand, François},
journal={Economic Theory},
month={July},
pages={503-526},
title={Defaulting Firms and Systemic Risks in Financial Networks: A Normative Approach},
volume={70},
year={2020}}
The standard treatment for high-grade non-Hodgkin lymphoma involves the combination of chemotherapy and immunotherapy. We characterize in-silico the optimal combination protocol that maximizes the overall survival probability.
@article{HLb:19,
author={Houy, Nicolas and LeGrand, François},
journal={Mathematical Biosciences},
month={September},
pages={108227},
title={Optimizing Treatment Combination for Lymphoma Using an Optimization Heuristic},
volume={315},
year={2019}}
We provide an intertemporal behavior criterion that helps discriminate between dynamic models of ambiguity aversion and expected utility models with endogenous discounting.
@article{BKL:19,
author={Bommier, Antoine and Kochov, Asen and LeGrand, François},
journal={Journal of Mathematical Economics},
month={August},
pages={48-62},
title={Ambiguity and Endogenous Discounting?},
volume={83},
year={2019}}
We compute optimal personalized protocols using AI techniques. We quantify in-silico the benefits offered by personalized oncology in the case of temozolomide administration.
@article{HLc:19,
author={Houy, Nicolas and LeGrand, François},
journal={Artificial Intelligence in Medicine},
month={August},
pages={101693},
title={Personalized Oncology with Artificial Intelligence: The Case of Temozolomide},
volume={99},
year={2019}}
We provide an example economy where Perron-Frobenius theory can help recover determinants of market segmentation.
@article{L:19,
author={LeGrand, François},
journal={Economics Letters},
month={January},
pages={186-188},
title={Perron-Frobenius Theory Recovers More Than What You Might Think: The Example of Limited Participation},
volume={174},
year={2019}}
In a very general infinite-horizon setting, precautionary savings are proved to covary positively with risk aversion, whenever preferences are monotone and the income process is stochastically monotone.
@article{BL:19,
author={Bommier, Antoine and LeGrand, François},
journal={Management Science},
month={March},
number={3},
pages={1386-1397},
title={Risk Aversion and Precautionary Savings in Dynamic Settings},
volume={65},
year={2019}}
We propose a methodology borrowed from IA to optimize the administration of anti-VEGF and unlicensed dendritic cells. We show that optimized protocols enable to significantly reduce total drug use.
@article{HL:19,
author={Houy, Nicolas and LeGrand, François},
journal={Journal of Theoretical Biology},
month={January},
pages={34-40},
title={Optimizing Immune Cell Therapies with Artificial Intelligence},
volume={461},
year={2019}}
We use artificial intelligence to determine an optimal protocol in a heterogeneous population. Compared to conventional protocol, our solution achieves a sizable reduction in tumor size for a similar toxicity.
@article{HL:18b,
author={Houy, Nicolas and LeGrand, François},
journal={PLoS ONE},
month={June},
number={6},
pages={e0199076},
title={Optimal Dynamic Regimens with Artificial Intelligence: The Case of Temozolomide},
volume={13},
year={2018}}
We propose an innovative methodology for characterizing optimal chemotherapy protocols. We discuss the optimality of conventional and metronomic regimens.
@article{HL:18a,
author={Houy, Nicolas and LeGrand, François},
journal={Journal of Theoretical Biology},
month={June},
pages={71-78},
title={Administration of Temozolomide: Comparison of Conventional and Metronomic Chemotherapy Regimens},
volume={446},
year={2018}}
We propose class of tractable incomplete-market models, with aggregate risk and financial participation costs, that enables to quantitatively reproduce US asset price properties and the risk exposure of US households.
@article{LR:18,
author={LeGrand, François and Ragot, Xavier},
journal={European Economic Review},
month={April},
pages={39-59},
title={A Class of Tractable Incomplete-Market Models for Studying Asset Returns and Risk Exposure},
volume={103},
year={2018}}
We prove that risk-sensitive preferences are the only preferences to be monotone and to disentangle risk aversion and elasticity of substitution.
@article{BoKoLe:17,
author={Bommier, Antoine and Kochov, Asen and LeGrand, François},
journal={Econometrica},
month={September},
number={5},
pages={1433-1466},
title={On Monotone Recursive Preferences},
volume={85},
year={2017}}
We prove the existence of equilibrium in nonrenewable resource markets when extraction costs are non-convex and resource storage is possible.
@article{BBL:17,
author={Bommier, Antoine and Bretschger, Lucas and LeGrand, François},
journal={Economic Theory},
month={March},
number={3},
pages={687-721},
title={Existence of Equilibria in Exhaustible Resource Markets with Economies of Scale and Inventories},
volume={63},
year={2017}}
In an incomplete market economy with aggregate risk, option trading and option prices are driven by heterogeneous uninsurable risks.
@article{LR:16,
author={LeGrand, François and Ragot, Xavier},
journal={Economic Theory},
month={August},
number={3},
pages={517-545},
title={Incomplete Markets and Derivative Assets},
volume={62},
year={2016}}
In a life-cycle model, risk aversion is found to decrease the demand for annuities: Risk attitudes may then contribute to explain the “annuity puzzle”.
@article{BL:14,
author={Bommier, Antoine and LeGrand, François},
journal={Journal of Risk and Uncertainty},
month={April},
number={2},
pages={135-166},
title={Too Risk Averse to Purchase Insurance? A Theoretical Glance at the Annuity Puzzle},
volume={48},
year={2014}}
In an incomplete market economy with aggregate risk, a larger bond volume is found to increase both the level and the slope of the term structure of interest rates.
@article{CLR:13,
author={Challe, Edouard and LeGrand, François and Ragot, Xavier},
journal={Journal of Economic Theory},
month={November},
number={6},
pages={2483-2519},
title={Incomplete Markets, Liquidation Risk and the Term Structure of Interest Rates},
volume={148},
year={2013}}
In a model-free framework, risk aversion is found to have an intuitive impact. The more risk averse the agent, the closer her behaviour to the one in a bad state.
@article{BCL:12,
author={Bommier, Antoine and Chassagnon, Arnold and LeGrand, François},
journal={Journal of Economic Theory},
month={July},
number={4},
pages={1614-1641},
title={Comparative Risk Aversion: A Formal Approach with Applications to Saving Behaviors},
volume={147},
year={2012}}