-
Cross-border regulatory spillovers and macroprudential policy coordination J. Monet. Econ. (IF 4.63) Pub Date : 2024-04-10 Pierre-Richard Agénor, Timothy P. Jackson, Luiz A. Pereira da Silva
We develop a core–periphery model with financial frictions and cross-border banking to assess the magnitude of regulatory spillovers and the gains from macroprudential policy coordination. A core global bank lends to its affiliates in the periphery and banks in both regions are subject to risk-sensitive capital regulation. Following an expansionary monetary policy in the core, a countercyclical response
-
The unemployment–inflation trade-off revisited: The Phillips curve in COVID times J. Monet. Econ. (IF 4.63) Pub Date : 2024-04-01 Richard K. Crump, Stefano Eusepi, Marc Giannoni, Ayşegül Şahin
Using a New Keynesian Phillips curve, we document the rapid and persistent increase in the natural rate of unemployment, , in the aftermath of the pandemic and characterize its implications for inflation dynamics. While the bulk of the inflation surge is attributed to temporary supply factors, we also find an important role for current and expected negative unemployment gaps. Through the lens of the
-
A HANK[formula omitted] model of monetary unions J. Monet. Econ. (IF 4.63) Pub Date : 2024-03-27 Christian Bayer, Alexander Kriwoluzky, Gernot J. Müller, Fabian Seyrich
How does a monetary union alter the impact of business cycle shocks at the household level? We develop a Heterogeneous Agent New Keynesian model of two countries (HANK) and show in closed form that a monetary union shifts the adjustment to a shock horizontally across countries, within the brackets of the union-wide wealth distribution, rather than vertically, that is, across the brackets of the union-wide
-
The consumption expenditure response to unemployment: Evidence from Norwegian households J. Monet. Econ. (IF 4.63) Pub Date : 2024-03-27 Andreas Fagereng, Helene Onshuus, Kjersti N. Torstensen
This paper examines heterogeneity in household income and consumption responses to unemployment, using granular administrative tax data from Norway. On average, unemployment results in a significant, lasting income reduction, accompanied by a decrease in consumption expenditures of between one-third to one-half of the income loss. We find that households with greater liquid assets at the outset experience
-
Adverse selection and search congestion in over-the-counter markets J. Monet. Econ. (IF 4.63) Pub Date : 2024-03-24 Taneli Mäkinen, Francesco Palazzo
Asymmetric information about both private valuations of assets and their quality gives rise to uncertainty over sellers’ motives of trade, allowing high-valuation holders of low-quality assets to engage in speculative trades that involve no allocative gains. When sellers compete to find buyers, such speculative behaviour not only dilutes the average quality of assets but also creates a welfare-detrimental
-
Expectation-driven boom-bust cycles J. Monet. Econ. (IF 4.63) Pub Date : 2024-03-21 Marco Brianti, Vito Cormun
Using data from the Survey of Professional Forecasters, we observe that a large fraction of analysts’ expectations about future economic growth is not due to technology or other shocks to fundamentals measured by the business cycle literature. We find that these unexplained changes in forecast revisions predict significant boom-bust dynamics in the key macroeconomic aggregates. We offer a novel theory
-
The real effects of borrower-based macroprudential policy: Evidence from administrative household-level data J. Monet. Econ. (IF 4.63) Pub Date : 2024-03-21 Sjoerd van Bekkum, Marc Gabarro, Rustom M. Irani, José-Luis Peydró
We analyze the effects of borrower-based macroprudential policy at the . We exploit administrative Dutch tax and housing records in conjunction with the introduction of a mortgage loan-to-value (LTV) limit. We find that the regulation sharply reduces mortgage leverage with bunching at the LTV limit. While (regulation) affected households reduce total leverage and interest expenses, they also decrease
-
(Trade) War and peace: How to impose international trade sanctions J. Monet. Econ. (IF 4.63) Pub Date : 2024-03-20 Gustavo de Souza, Naiyuan Hu, Haishi Li, Yuan Mei
What is the most cost-efficient way to impose trade sanctions against Russia? We build a quantitative model of international trade with input–output connections. Sanctioning countries choose import tariffs to simultaneously maximize their income and minimize Russia’s income, with different weights placed on these objectives. We find, first, that for countries with low willingness to pay for sanctions
-
The Fed takes on corporate credit risk: An analysis of the efficacy of the SMCCF J. Monet. Econ. (IF 4.63) Pub Date : 2024-03-13 Simon Gilchrist, Bin Wei, Vivian Z. Yue, Egon Zakrajšek
This paper evaluates the efficacy of the Secondary Market Corporate Credit Facility, a program designed to stabilize the U.S. corporate bond market during the COVID-19 pandemic. The program announcements on March 23 and April 9, 2020, significantly reduced investment-grade credit spreads across the maturity spectrum – irrespective of the program’s maturity-eligibility criterion – and ultimately restored
-
Averaging impulse responses using prediction pools J. Monet. Econ. (IF 4.63) Pub Date : 2024-03-10 Paul Ho, Thomas A. Lubik, Christian Matthes
Macroeconomists construct impulse responses using many competing time series models and different statistical paradigms (Bayesian or frequentist). We adapt optimal linear prediction pools to efficiently combine impulse response estimators for the effects of the same economic shock from this vast class of possible models. We thus alleviate the need to choose one specific model, obtaining weights that
-
The inflation expectations of U.S. firms: Evidence from a new survey J. Monet. Econ. (IF 4.63) Pub Date : 2024-03-02 Bernardo Candia, Olivier Coibion, Yuriy Gorodnichenko
Introducing a new survey of U.S. firms’ inflation expectations, we document key stylized facts involving what U.S. firms know and expect about inflation and monetary policy. The resulting time series of firms’ inflation expectations displays unique dynamics, distinct from those of households and professional forecasters. By any typical definition of “anchored” expectations, the inflation expectations
-
What moves markets? J. Monet. Econ. (IF 4.63) Pub Date : 2024-02-29 Mark Kerssenfischer, Maik Schmeling
What share of asset price movements is driven by news? We build a large, time-stamped event database covering scheduled macro news as well as unscheduled events and find that news account for up to 35% of bond and stock price movements in the United States and euro area since 2002. This suggests that a much larger share of return variation can be traced back to observable news than previously thought
-
Inflation at risk J. Monet. Econ. (IF 4.63) Pub Date : 2024-02-29 David López-Salido, Francesca Loria
Inflation at risk () refers to the tails of the distribution of inflation over a forecast horizon. We study using quantile regressions in a panel of OECD countries for a sample that includes the Global Financial Crisis and the rise in inflation during the Covid-19 pandemic. First, we find that even though recently the conditional mean of inflation has been low and stable, there was ample variability
-
Indirect consumer inflation expectations: Theory and evidence J. Monet. Econ. (IF 4.63) Pub Date : 2024-02-23 Ina Hajdini, Edward S. Knotek, John Leer, Mathieu Pedemonte, Robert Rich, Raphael Schoenle
Based on indirect utility theory, we ask consumers about the change in their incomes that would be required to offset expected price changes and buy the same amounts of goods and services one year ahead in a large-scale, high-frequency survey of consumers in the US and 14 other countries. Aggregating responses across consumers provides an alternative, indirect measure of inflation expectations compared
-
The roles of price points and menu costs in price rigidity J. Monet. Econ. (IF 4.63) Pub Date : 2024-02-15 Edward S. Knotek
Macroeconomic models often generate nominal price rigidity via menu costs. In scanner databases, (1) price points, embodied in nine-ending prices, account for two-thirds of prices; (2) at the conclusion of sales, post-sale prices return to their pre-sale levels more than three-fourths of the time; and (3) such memory around sales is stronger if the pre-sale price was a price point. Extending a canonical
-
Destabilizing search technology J. Monet. Econ. (IF 4.63) Pub Date : 2024-02-10 Tristan Potter
Modern job search technologies enable job seekers to monitor the arrival of newly posted vacancies. This paper conceptualizes search as a monitoring decision and shows that monitoring technologies give rise to a novel source of strategic complementarities in search and can thus lead to potentially destabilizing multiplicity of equilibria. The model provides a theory of belief-driven fluctuations in
-
Beyond Pangloss: Financial sector origins of inefficient economic booms J. Monet. Econ. (IF 4.63) Pub Date : 2024-02-10 Frederic Malherbe, Michael McMahon
Government guarantees of bank liabilities have a long-standing history and are now ubiquitous. We study a model where financial sophistication enhances banks’ ability to exploit government guarantees and fuels inefficient economic booms. Driven by financial engineering, bank rent extraction creates a disconnect between lending decisions and borrower repayment prospects: In equilibrium, banks over-lend
-
Parameter learning in production economies J. Monet. Econ. (IF 4.63) Pub Date : 2024-02-08 Mykola Babiak, Roman Kozhan
We examine how parameter learning amplifies the impact of macroeconomic shocks on equity prices and quantities in a standard production economy where a representative agent has Epstein-Zin preferences. An investor observes technology shocks that follow a regime-switching process but does not know the underlying model parameters governing the short-term and long-run perspectives of economic growth.
-
Revisiting the monetary transmission mechanism through an industry-level differential approach J. Monet. Econ. (IF 4.63) Pub Date : 2024-02-03 Sangyup Choi, Tim Willems, Seung Yong Yoo
Combining industry-level data on output and prices with novel monetary policy shock estimates for 102 countries, we analyze how the effects of monetary policy vary with industry characteristics. Next to being interesting in their own right, our findings are informative on the importance of various transmission mechanisms, as they are thought to vary systematically with the included characteristics
-
Central bank digital currency: When price and bank stability collide J. Monet. Econ. (IF 4.63) Pub Date : 2024-01-22 Linda Schilling, Jesús Fernández-Villaverde, Harald Uhlig
This paper shows the existence of a central bank trilemma. When a central bank is involved in financial intermediation, either directly through a central bank digital currency (CBDC) or indirectly through other policy instruments, it can only achieve two of three objectives: a socially efficient allocation, financial stability (i.e., absence of runs), and price stability. In particular, a commitment
-
How do people view wage and price inflation? J. Monet. Econ. (IF 4.63) Pub Date : 2024-01-18 Monica Jain, Olena Kostyshyna, Xu Zhang
Using household-level data from the Canadian Survey of Consumer Expectations over 2014Q4–2023Q2, we study wage growth expectations and their link with inflation expectations. We document novel facts about wage growth expectations and the uncertainty around them. Households associate higher wage growth with a stronger economy. The link between wage and inflation expectations is weak, but stronger during
-
Wage and earnings inequality between and within occupations: The role of labor supply J. Monet. Econ. (IF 4.63) Pub Date : 2024-01-18 Andrés Erosa, Luisa Fuster, Gueorgui Kambourov, Richard Rogerson
We document systematic differences in wage and earnings inequality both between and within occupations and show that these differences are intimately related to systematic differences in labor supply across occupations. We then develop a variant of a Roy model in which earnings are a non-linear function of hours, with the extent of this non-linearity differing across occupations. In our theory, the
-
Housing cycles and gentrification J. Monet. Econ. (IF 4.63) Pub Date : 2024-01-17 Daniel Murphy
The analysis in this paper documents a high-frequency link between housing markets and downtown gentrification since the mid-1990s. Specifically, property values and the share of formally educated residents increase more in downtown locations than in suburbs during MSA-wide housing market expansions. This relationship holds conditional on changes in MSA-level high-end incomes and is evident at short
-
Mortgage interest deductions? Not a bad idea after all J. Monet. Econ. (IF 4.63) Pub Date : 2024-01-12 Shahar Rotberg, Joseph B. Steinberg
Mortgage interest deductions and other homeownership subsidies are widely believed to be harmful because they redistribute resources from lower-income renters to higher-income homeowners. We argue that renters actually benefit from these policies in general equilibrium for two reasons. First, the rental supply curve is relatively inelastic, which means that rents fall when these policies reduce rental
-
Global risk and the dollar J. Monet. Econ. (IF 4.63) Pub Date : 2024-01-11 Georgios Georgiadis, Gernot J. Müller, Ben Schumann
The dollar is a safe-haven currency and appreciates when global risk goes up. We investigate the dollar’s role for the transmission of global risk to the world economy within a Bayesian proxy structural vectorautoregressive model. We identify global risk shocks using high-frequency asset-price surprises around narratively selected events. Global risk shocks appreciate the dollar, induce tighter global
-
Oil price shocks in real-time J. Monet. Econ. (IF 4.63) Pub Date : 2024-01-10 Andrea Gazzani, Fabrizio Venditti, Giovanni Veronese
Oil prices contain information on global shocks of key relevance for monetary policy decisions. We propose a novel approach to identify these shocks at the daily frequency in a Structural Vector Autoregression (SVAR). Our method is devised to be used in real-time to interpret the developments in the oil market and their implications for the macroeconomy, circumventing the problem of publication lags
-
Estimating the Fed’s unconventional policy shocks J. Monet. Econ. (IF 4.63) Pub Date : 2024-01-09 Marek Jarociński
Financial market responses to Fed monetary policy announcements are often very small, but sometimes very large and the mix of news contained in these announcements varies over time. I exploit these features of the data to estimate different types of Fed policy shocks. The resulting shocks can be naturally labeled as standard monetary policy, Odyssean forward guidance, large scale asset purchases and
-
-
How to limit the spillover from an inflation surge to inflation expectations? J. Monet. Econ. (IF 4.63) Pub Date : 2023-12-19 Lena Dräger, Michael J. Lamla, Damjan Pfajfar
Using a randomized control trial on German consumers we show that information about rising inflation increases inflation expectations. This initial increase in expectations can be mitigated by providing forecasts of inflation. Information about (future) inflation affects the whole term structure of inflation expectations, where the effects are smaller for longer-run expectations. This information also
-
Monetary policy and the persistent aggregate effects of wealth redistribution J. Monet. Econ. (IF 4.63) Pub Date : 2023-12-19 Martin Kuncl, Alexander Ueberfeldt
Monetary easing redistributes from savers, some of whom are retired and not adjusting labor supply, to borrowers who reduce their labor supply. This results in persistently lower aggregate labor and output. Hence the interaction of labor supply heterogeneity with heterogeneity in net nominal positions of households creates a monetary policy trade-off whereby short-term economic stimulus is followed
-
Cyclicality of uncertainty and disagreement J. Monet. Econ. (IF 4.63) Pub Date : 2023-12-11 Osnat Zohar
The empirical literature often uses disagreement (dispersion in forecasts) as a proxy for uncertainty, yet disagreement and uncertainty behave differently throughout the business cycle. The difference is especially salient in non-crisis periods, in which measures of disagreement are positively correlated with growth, while measures of uncertainty are negatively correlated with it. I explain this finding
-
Consumer demand and credit supply as barriers to growth for Black-owned startups J. Monet. Econ. (IF 4.63) Pub Date : 2023-12-06 Eugene Tan, Teegawende H. Zeida
We formulate a framework showing that differences in capital returns and capital intensity between groups of firms can identify relative differences in consumer demand and credit constraints. Using micro-data on Black- and White-owned startups, we find robust evidence that Black-owned startups have lower capital returns, implying that Black-owned startups face lower consumer demand due to race. In
-
-
Make-up strategies with finite planning horizons but infinitely forward-looking asset prices J. Monet. Econ. (IF 4.63) Pub Date : 2023-11-18 Stéphane Dupraz, Hervé Le Bihan, Julien Matheron
How effective are forward-guidance and make-up strategies? Standard models find them extremely effective, but by assuming households’ inflation expectations respond much more strongly than in the data. Models where households discount the future find them much less effective and match the small reaction of inflation expectations, but not the actual large reaction of asset prices. We build a model that
-
Introduction to the 100th Carnegie-Rochester-New York University Conference on Public Policy Volume J. Monet. Econ. (IF 4.63) Pub Date : 2023-11-12 Christopher Sleet
Abstract not available
-
Comment on: “International tax competition with rising intangible capital and financial globalization” by Vincenzo Quadrini and José-Victor Ríos-Rull J. Monet. Econ. (IF 4.63) Pub Date : 2023-11-10 Fabrizio Perri
Abstract not available
-
Is a fiscal union optimal for a monetary union? J. Monet. Econ. (IF 4.63) Pub Date : 2023-11-10 Rafael Berriel, Eugenia Gonzalez-Aguado, Patrick J. Kehoe, Elena Pastorino
When is a fiscal union appropriate for a monetary union? In a monetary union without fiscal externalities, when local fiscal authorities have an informational advantage over a central fiscal authority in terms of their knowledge of countries’ preferences for government spending, a decentralized fiscal regime dominates a centralized one. Our novel result is that in the presence of fiscal externalities
-
Fencing off Silicon Valley: Cross-border venture capital and technology spillovers J. Monet. Econ. (IF 4.63) Pub Date : 2023-11-07 Ufuk Akcigit, Sina T. Ates, Josh Lerner, Richard R. Townsend, Yulia Zhestkova
The treatment of foreign investors is a contentious topic in U.S. entrepreneurship policy. We model a setting where foreign corporate investments in Silicon Valley may allow U.S. entrepreneurs to pursue technologies that they could not otherwise, but may also lead to knowledge spillovers. We show that despite the benefits from such inbound investments for U.S. firms, it may be optimal for the U.S.
-
The international spillovers of synchronous monetary tightening J. Monet. Econ. (IF 4.63) Pub Date : 2023-11-07 Dario Caldara, Francesco Ferrante, Matteo Iacoviello, Andrea Prestipino, Albert Queralto
We use historical data and a calibrated model of the world economy to study how a synchronous monetary tightening can amplify cross-border transmission of monetary policy. The empirical analysis shows that historical episodes of synchronous tightening are associated with tighter financial conditions and larger effects on economic activity than asynchronous ones. In the model, a sufficiently large synchronous
-
Rational overoptimism and limited liability J. Monet. Econ. (IF 4.63) Pub Date : 2023-11-05 Luca Gemmi
Is excessive risk-taking in credit cycles driven by incentives or biased beliefs? I propose a framework suggesting that the two are actually related and, specifically, that procyclical overoptimism can arise rationally from risk-taking incentives. I show that when firms and banks have a limited liability payoff structure, they have lower incentives to pay attention to the aggregate conditions that
-
Comment on: “The International Spillovers of Synchronous Monetary Tightening” by Dario Caldara, Francesco Ferrante, Matteo Iacoviello, Andrea Prestipino, and Albert Queralto J. Monet. Econ. (IF 4.63) Pub Date : 2023-11-04 Giancarlo Corsetti
Ever since Rogoff, 1985, international policy cooperation has been considered particularly counterproductive in periods of disinflation—the argument being that cross-border agreement aiming to moderate the global recessionary effects of monetary policy would erode the credibility of domestic monetary authorities in the eyes of domestic workers and firms. The paper by Caldara et al. offers a timely
-
“Fencing off silicon valley: Cross-border venture capital and technology spillovers” J. Monet. Econ. (IF 4.63) Pub Date : 2023-11-04 Samuel Kortum
None.
-
Does risk matter more in recessions than in expansions? Implications for monetary policy J. Monet. Econ. (IF 4.63) Pub Date : 2023-11-04 Martin M. Andreasen, Giovanni Caggiano, Efrem Castelnuovo, Giovanni Pellegrino
We employ a nonlinear vector autoregression and a non-recursive identification strategy to show that an equal-sized uncertainty shock generates a larger contraction in real activity when growth is low (as in recessions) than when growth is high (as in expansions). An estimated New Keynesian model with recursive preferences replicates these state-contingent responses when approximated to third order
-
On wars, sanctions, and sovereign default J. Monet. Econ. (IF 4.63) Pub Date : 2023-10-31 Javier Bianchi, César Sosa-Padilla
This paper explores the role of restrictions on the use of international reserves as economic sanctions. We develop a simple model of the strategic game between a sanctioning (creditor) country and a sanctioned (debtor) country. We characterize how the sanctioning country should impose restrictions optimally, internalizing the geopolitical benefits and the potential losses of a default by the sanctioned
-
Comment on trade wars and industrial policy competitions: understanding the U.S.-China economic conflicts J. Monet. Econ. (IF 4.63) Pub Date : 2023-10-28 Fernando Parro
Abstract not available
-
How does the fed affect corporate credit costs? Default risk, creditor segmentation and the post-FOMC drift J. Monet. Econ. (IF 4.63) Pub Date : 2023-10-28 Stefan Walz
Surprise changes in monetary policy rates have a causal impact on credit risk measures, which display a significant post-FOMC drift. I employ a tight identification strategy to decompose the influence of firm-specific and creditor-specific factors across horizons. Firms with narrower income gaps and lower Tobin’s Q ratios exhibit heightened sensitivity at both short and long horizons. Bonds predominantly
-
Asymmetric information and misaligned inflation expectations J. Monet. Econ. (IF 4.63) Pub Date : 2023-10-28 Zhao Han
Recent survey evidence reveals misaligned inflation expectations among economic agents. While households associate higher expected inflation with lower output growth, professional forecasters link higher future inflation to higher output growth. Firms’ expectations display neither negative nor positive correlations. We explain such patterns in a general equilibrium New Keynesian framework. Asymmetric
-
Comment on “On Wars, Sanctions, and Sovereign Default” by Javier Bianchi and César Sosa-Padilla J. Monet. Econ. (IF 4.63) Pub Date : 2023-10-28 Gabriel Mihalache
Abstract not available
-
The sentimental propagation of lottery winnings: Evidence from the Spanish Christmas lottery J. Monet. Econ. (IF 4.63) Pub Date : 2023-10-27 Morteza Ghomi, Isabel Micó-Millán, Evi Pappa
Using the Spanish Christmas lottery as a natural experiment, the impact of geographically clustered lottery winnings on consumer sentiment and intended durable consumption is analyzed. Albeit not receiving lottery prizes, consumers in winning provinces become significantly more optimistic about the Spanish macroeconomic conditions than those living elsewhere. This variation in sentiment is shown to
-
The emergence of procyclical fertility: The role of breadwinner women J. Monet. Econ. (IF 4.63) Pub Date : 2023-10-13 Sena Coskun, Husnu Dalgic
Fertility in the US exhibits an increasingly more procyclical pattern. We argue that women’s breadwinner status is behind procyclical and lower fertility: (i) women’s relative income in the family has increased over time; and (ii) women are more likely to work in relatively stable and countercyclical industries whereas men tend to work in volatile and procyclical industries. This creates a countercyclical
-
Discussion of “Fiscal federalism and monetary unions” by Berriel, Gonzalez-Aguado, Kehoe, and Pastorino J. Monet. Econ. (IF 4.63) Pub Date : 2023-10-13 Marco Bassetto, Jason Hall
The relative desirability of a centralized or decentralized fiscal authority depends on both the borrowing externality identified in Berriel et al. and the informational cost of centralizing spending decisions. It is not ex-ante obvious which force dominates as the number of countries grows, but the institutional design of the European system suggests that the externality dominates in practice. We
-
Comment on: “Optimal Taxation of Multinational Enterprises: A Ramsey Approach”, by Sebastian Dyrda, Guangbin Hong, and Joseph B. Steinberg J. Monet. Econ. (IF 4.63) Pub Date : 2023-10-12 Ana Maria Santacreu
This is a comment on “Optimal Taxation of Multinational Enterprises: A Ramsey Approach”, by Sebastian Dyrda, Guangbin Hong, and Joseph B.Steinberg.
-
Critique and consequence J. Monet. Econ. (IF 4.63) Pub Date : 2023-10-12 Thomas J. Sargent
After describing the landscape in macroeconomics and econometrics in Spring 1973 when Robert E. Lucas (1976) first presented his Critique at the inaugural Carnegie-Rochester conference, I add a fourth example based on Sargent and Wallace (1973) to those in section 5 of Lucas’s paper. To portray consequences of Lucas’s Critique, I use it as a vehicle to describe the time inconsistency of optimal plans
-
Optimal taxation of multinational enterprises: A Ramsey approach J. Monet. Econ. (IF 4.63) Pub Date : 2023-10-12 Sebastian Dyrda, Guangbin Hong, Joseph B. Steinberg
What is the optimal design of the international corporate tax system? We revisit this classic question in a multi-country general equilibrium model that incorporates three key features of the modern globalized economy: multinational production; intangible capital; and international profit shifting. Our model’s competitive equilibrium is inefficient due to an externality that arises from international
-
-
Credit constraints and firms’ decisions: Lessons from the COVID-19 outbreak J. Monet. Econ. (IF 4.63) Pub Date : 2023-09-29 Pierluigi Balduzzi, Emanuele Brancati, Marco Brianti, Fabio Schiantarelli
Using novel survey data on Italian firms’ expectations collected just before and after the beginning of the COVID-19 outbreak, we investigate the role of credit constraints in the transmission of adverse economic shocks. Our results show that credit-constrained firms plan to charge higher prices than unconstrained ones while expecting a larger fall in quantities. When we consider realized outcomes
-
Optimal monetary policy with r∗<0 J. Monet. Econ. (IF 4.63) Pub Date : 2023-09-23 Roberto Billi, Jordi Galí, Anton Nakov
We study the optimal monetary policy problem in a New Keynesian economy with a zero lower bound (ZLB) on the nominal interest rate, when the steady state natural rate (r∗) becomes permanently negative. We show that the optimal policy aims to approach gradually a new steady state with positive average inflation. Around that steady state, the optimal policy implies well defined (second-best) paths for
-
The chronology of Brexit and UK monetary policy J. Monet. Econ. (IF 4.63) Pub Date : 2023-09-18 Martin Geiger, Jochen Güntner
The outcome of the Brexit referendum in June 2016 was largely unanticipated. Even after the “Leave” vote, surprises regarding the withdrawal process affected the UK economy. We draw on an official list of political events published by the House of Commons Library and daily data on asset prices and economic policy uncertainty to construct a novel instrument for Brexit surprises. Including a monthly
-
More than words: Fed Chairs’ communication during congressional testimonies J. Monet. Econ. (IF 4.63) Pub Date : 2023-09-15 Michelle Alexopoulos, Xinfen Han, Oleksiy Kryvtsov, Xu Zhang
We study soft information contained in congressional testimonies by the Federal Reserve Chairs and analyze its effects on financial markets. Using machine learning, we construct high-frequency measures of Fed Chair’s and Congress members’ emotions expressed via their words, voice and face. Increases in the Chair’s text-, voice-, or face-emotion indices during the testimony generally raise the S&P500
-
Marginal tax rates and income in the long run: Evidence from a structural estimation J. Monet. Econ. (IF 4.63) Pub Date : 2023-09-09 Patrick Macnamara, Myroslav Pidkuyko, Raffaele Rossi
We estimate a life-cycle model of savings, labor productivity and entrepreneurs to measure the long-run response of income to marginal tax rate cuts in the US. Long-run tax elasticities of income are largest for the richest 1% but are also positive and substantial for other income groups. In equilibrium, entrepreneurs obtain higher returns on wealth. This increases the investment response of rich,