1,721,259 research outputs found
Replication data for: "Culture, Institutions and the Wealth of Nations"
No full textGorodnichenko, Yuriy, and Roland, Gerard, (2017) “Culture, Institutions, and the Wealth of Nations.” Review of Economics and Statistics 99:3, 402-416
Replication data for: "Culture, Institutions and the Wealth of Nations"
No full textGorodnichenko, Yuriy, and Roland, Gerard, (2017) “Culture, Institutions, and the Wealth of Nations.” Review of Economics and Statistics 99:3, 402-416
Replication package for: "Unbundling Quantitative Easing: Taking a Cue from Treasury Auctions"
No full textThis is the replication package for "Unbundling Quantitative Easing: Taking a Cue from Treasury Auctions," accepted in 2023 by the Journal of Political Economy
The economics of financial stress
No full textWe study the psychological costs of financial constraints and their economic consequences. Using a representative survey of U.S. households, we document the prevalence of financial stress in U.S. households and a strong relationship between financial stress and measures of financial constraints. We incorporate financial stress into an otherwise standard dynamic model of consumption and labour supply. We emphasize two key results. First, both financial stress itself and naivete about financial stress are important components of a psychology-based theory of the poverty trap. Sophisticated households, instead, save extra to escape high-stress states because they understand that doing so alleviates the economic consequences of financial stress. Second, the financial stress channel dampens or reverses the counterfactual large negative wealth effect on labour earnings because relieving stress frees up cognitive resources for productive work. Financial stress also has macroeconomic implications for wealth inequality and fiscal multipliers
Inequality and Volatility Moderation in Russia: Evidence from Micro-Level Panel Data on Consumption and Income
Full text linkWe construct key household and individual economic variables using a panel micro data set from the Russia Longitudinal Monitoring Survey (RLMS) for 1994-2005. We analyze cross-sectional income and consumption inequality and find that inequality decreased during the 2000-2005 economic recovery. The decrease appears to be driven by falling volatility of transitory income shocks. The response of consumption to permanent and transitory income shocks becomes weaker later in the sample, consistent with greater self-insurance against permanent shocks and greater smoothing of transitory shocks. Comparisons of RLMS data with official macroeconomic statistics reveal that national accounts may underestimate the extent of unofficial economic activity, and that the official consumer price index may overstate inflation and be prone to quality bias.transition, inequality, income, consumption, Russia
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Essays in Macroeconomics: New History of Oil Market, Regional, and Seasonal Fluctuations
No full textThis thesis offers new history and analysis of three types of macroeconomic fluctuations that have featured prominently in modern American life: the oil shocks of the 1970s, disruptions to regional industries, and the seasonal holiday boom. In each case I point out institutional details that make the fluctuation unique while showing how its effects can be analyzed with standard macroeconomic frameworks. The first chapter studies the role of regulation in the oil crises of the 1970s, and argues that regulatory rules prevented markets from reallocating resources in response to losses of oil supplies. I present several new data sources suggesting there was misallocation during this episode, and use a general equilibrium model to argue that regulatory rules aggravated the losses occurring at the start of the 1974 recession. The second chapter introduces new data sources that measure consumer spending at the state level, and studies how this local spending responds to changes in banking regulations and military procurement contracts. With my co-author, I find that military spending contracts can have large effects on differences in regional consumer spending, but banking integration helps mitigate these cross-regional differences. The third chapter unpacks the seasonal pattern in holiday purchases, and shows that the month of December has an outsize role on investment in household durables, but the size of this role varies across households with low and high consumption. Theoretically, I show how these facts imply that income risk, borrowing constraints, and adjustment costs play a role in the seasonal cycle, despite it being a highly stable and predictable environment. Collectively, these essays show that political and cultural factors are an important source of macroeconomic shocks, and also that effective banking and regulatory institutions are important for mitigating such shocks
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Financial Markets and the Macroeconomy: Theory, Evidence and Policy Prescriptions
Full text linkThis dissertation investigates the role of financial markets as a driving force behind business cycle fluctuations and studies effective monetary policy responses that mitigate the negative economic impact of such fluctuations. The first chapter empirically investigates the consequences of the 2007 interbank market freeze and provides a new theoretical framework to study the economic benefits and risks arising from complex financial networks. I use highly detailed proprietary microdata from the German Bundesbank to provide evidence that exposure to the US financial market had a negative impact across several measures on domestic German monetary financial institutions (MFIs) and their clients. I develop a dynamic stochastic general equilibrium model of the macroeconomy with a banking sector that intermediates funds between depositors and firms. I show that interbank fund transactions improve the allocation of household savings across the economy, but also affect its volatility by determining how sensitive the aggregate supply of credit becomes to individual-bank shocks. I use the model to provide estimates of the welfare contribution of the interbank market to the German economy and the costs of bank disintermediation that followed the 2007 financial crisis. I study the welfare benefits of standard monetary policy and central bank lender-of-last-resort interventions, and I find that policies that actively target the credit spread arising from the banking sector are more effective.The second chapter studies the historical (1868-1930 period) propagation of banking panics across the United States. I develop a partial equilibrium model of the interbank market consistent with the historical pyramidal reserve structure of deposits that was in place throughout the period. The model presents a simple tradeoff between an efficient allocation of bank funds and exposure to cross-border deposit fluctuations. I empirically estimate the dynamic spatial propagation of panics and I find that panics are accompanied by moderate but temporary drops in variables capturing banking sector activity, together with a robust spatial propagation consistent with the model.
The third chapter investigates the welfare costs of the zero-lower bound (ZLB) on nominal interest rates and presents a theoretical New-Keynesian framework that incorporates the main empirical properties of ZLB spells. Employing a regime-switching (RS) risk-premium process to bring rates to the ZLB, I demonstrate how both frequency and duration of ZLB episodes can be jointly matched to realistic values. I find that duration exerts a strongly non-linear negative effect on welfare, which leads traditional models of the ZLB to seriously underestimate the costs of ZLB episodes. I conclude the chapter by discussing the optimal monetary policy inflation target and its relationship to the prevalence of ZLB episodes. I show that the optimum target lies at the point in which the marginal costs and benefits of trend inflation are equalized, and a calibration of the model to the U.S. economy generates optimal inflation mandates consistent with the 2% target commonly followed in most advanced economies
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Expectations and Uncertainty in the Macroeconomy
Full text linkThis dissertation consists of three chapters with a common theme of expectations and beliefs in the macroeconomy. The first chapter introduces a micro-level measure of consumer inflation uncertainty. Literature on cognition and communication documents that people use round numbers as a communicative tool to convey uncertainty. I construct an uncertainty measure that exploits consumers' tendency to round their inflation forecasts to multiples of five on the Michigan Survey of Consumers. I document cross-sectional and time series properties of the measure and provide support for its validity. Mean inflation uncertainty is countercyclical and positively correlated with inflation disagreement, inflation volatility, and the Economic Policy Uncertainty Index. Inflation uncertainty varies more in the cross section than over time, so a major benefit of this new measure is its cross-sectional dimension which enables micro-level analysis of the relationship between uncertainty and consumption. More uncertain consumers are more reluctant to spend on durables, cars, and homes, and their spending attitudes are less sensitive to interest rates. The measure also has applications to inflation dynamics and monetary policy. For example, the expectations of more-certain consumers can be used to improve Phillips curve estimation.The second chapter focuses on central bank communication with households. Transparent communication with the general public is a stated goal of the Federal Reserve. While most research has focused on central bank communication with financial markets, this paper evaluates the effectiveness of Federal Reserve communication with the public at large. While professional forecasters are attentive to Federal Reserve communications regarding the price stability objective, including the announcement of a 2% inflation target, many households are not. Consumers' inflation expectations are weakly-anchored, especially among less-educated, low-income, and female consumers. Anchoring has not improved notably since the late 1990s. News and media data reveal that Federal Reserve communications are not widely propagated through traditional or new media channels to the public and that that consumers do not proactively seek information on monetary policy. Evidence collected from dozens of surveys from the 1950s to 2014 exposes a lack of public awareness of the Federal Reserve and its objectives and a decline in public opinion of central bankers.The third chapter studies expectations in an important episode of economic history. Competing interpretations of the Great Depression depend on the behavior of inflation expectations in the onset and recovery. A number of papers have examined whether the deflation of 1930-32 was anticipated and when positive inflationary expectations reappeared. I review and compare the various statistical, narrative, and market-based approaches that have been used to estimate inflation expectations in the Great Depression era and supplement these approaches with additional methods and narrative evidence. I introduce a new approach using Phillips curve estimation. Reconciling the disparate findings of the previous literature, I conclude that the deflation was mostly unanticipated until mid-1930 and that a regime change occurred at the start of Roosevelt's presidency, prior to monetary expansion
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Essays in Macroeconomics and Financial Frictions
Full text linkRecent economic experiences have demonstrated the importance of understanding departures from frictionless markets and perfect information-processing for the field of macroeconomics. The global financial crisis has highlighted the importance of financial frictions for macroeconomic policy. With conventional monetary policy unable to stabilize the economy in the wake of the global financial crisis, central banks turned to unconventional tools. Understanding how these tools worked through interactions with financial market disruptions is crucial for designing and implementing policies to deal with the next crisis. The first two chapters show theoretically how unconventional policy worked, and test these predictions in the data.The rise of political polarization over the past decades raises important questions about how households form macroeconomic beliefs, and how this departs from the typical rationality assumptions embedded in textbook macroeconomic models. The final chapter shows theoretically how imperfect information-processing leads to a divergence of macroeconomic beliefs across households. Empirically, growing disagreement about macroeconomic outcomes is found in survey data; moreover, this disagreement leads to differential consumptions decisions following political shocks.Chapter 1 embeds a model of the term structure of interest rates featuring market segmentation and limits to arbitrage within a New Keynesian model to study unconventional monetary policy. Because the transmission of monetary policy depends on private agents with limited risk-bearing capacity, financial market disruptions reduce the efficacy of both conventional policy as well as forward guidance. Conversely, financial crises are precisely when large scale asset purchases are most effective. Policymakers can take advantage of the inability of financial markets to fully absorb these purchases, which can push down long-term interest rates and help stabilize output and inflation.Chapter 2 seeks to understand empirically the effects of large-scale asset purchase programs recently implemented by central banks. In joint work with Yuriy Gorodnichenko, we study how markets absorb large demand shocks for risk-free debt. Using high-frequency identification, we exploit the structure of the primary market for U.S. Treasuries to isolate demand shocks. These shocks are sizable, leading to large movements in Treasury yields and impacting corporate borrowing rates. Informed by a preferred habitat model of the term structure, we test for "local" demand effects and find evidence consistent with theoretical predictions. Crucially, this local effect is strongest when financial markets are disrupted. Our estimates are consistent with the view that quantitative easing worked mainly via market segmentation, with a potentially limited role for other channels.Chapter 3 explores the role of political polarization in shaping the economic expectations and consumption behavior of households. In joint work with Rupal Kamdar, we first develop a rational inattention model in which heterogeneous households must decide how to obtain information. Theoretically, we show there is a "paradox of information" where falling information costs exacerbate disagreement. Next, using survey data, we find evidence that political polarization has increased dispersion in macroeconomic beliefs. Disagreement is particularly acute following a general election when the presidential party switches; moreover, this effect has been increasing since the 1980s. Finally, we also find that polarization feeds into consumption decisions. Using high-frequency spending data at the zip code level in California, we find Republican-leaning regions exhibit substantially larger consumption following the 2016 election
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Essays in Macroeconomics: Business Cycles, Monetary Policy, and Labor Market
Full text linkIn this dissertation, I study labor market dynamics and positive and normative analysis of monetary policy over the business cycle. The first chapter studies how monetary policy can be more inclusive to benefit people who are particularly vulnerable over the business cycle by developing a tractable New Keynesian model with two types of labor. The second chapter focuses on labor market dynamics during the early COVID-19 period. This chapter studies the effect of the Stay-at-Home (SAH) orders on the labor market outcomes. The third chapter focuses on the effects of monetary policy. This chapter tries to estimate the extent of the information channel of monetary policy.In Chapter 1, “Good Jobs and Bad Jobs over the Business Cycle: Implications for Inclusive Monetary Policy,” I study how monetary policy can be more inclusive and benefit people who are more vulnerable to economic fluctuations. To shed light on this question, I study heterogeneity (“types”) in labor market arrangements and implications of this heterogeneity for welfare and optimal monetary policy. I document that the experiences of regular and irregular workers over the business cycle differ considerably. For example, the share of irregular workers in employment rises during recessions, suggesting that firms actively adjust labor composition over the business cycle. I develop a tractable New Keynesian model with regular and irregular labor types that reflect the cyclical nature of labor composition. I find that workers, who are marginally attached to either the regular or the irregular labor market, face larger volatilities in their consumption and disutility from labor supply and hence suffer larger welfare losses over the business cycle. I find that optimal monetary policy rule should react to employment dynamics in specific segments of the labor market than the overall stance of the labor market. When a central bank follows that rule, it benefits not only people who are more vulnerable to economic fluctuations but generate higher economy-wide welfare.Chapter 2, “Unemployment Effects of Stay-at-Home Orders: Evidence from High Frequency Claims Data,” is based on the joint work with Peter McCrory, Todd Messer, and Preston Mui, which is forthcoming in \emph{Review of Economics and Statistics}. We use the high-frequency, decentralized implementation of Stay-at-Home orders in the United States to disentangle the labor market effects of Stay-At-Home orders from the general economic disruption wrought by the COVID-19 pandemic. We find that each week of SAH exposure increased a state's weekly initial unemployment insurance (UI) claims by 1.9\% of its employment level relative to other states. A back-of-the-envelope calculation implies that, of the 17 million UI claims between March 14 and April 4, only 4 million were attributable to SAH orders. We present a currency union model to provide conditions for mapping this estimate to aggregate employment losses.Chapter 3, "Estimating the Effects of Central Bank Communications," is based on the joint work with Nicholas Sander. We estimate the extent to which expectations changes depend on explicit information given by central banks. We compare impulse responses to high-frequency monetary surprises during announcements when the Bank of England also releases a detailed inflation report to those where a simple press statement is released. We find that when a simple press statement is released policy has conventional signs: unemployment and inflation fall following a surprise tightening. However, when a detailed inflation report is released, surprise tightening raise unemployment and inflation suggesting the information effect can be controlled by central banks
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