Review of Economics and Statistics. Download NBER working paper: here
We empirically characterize episodes of large inflation surges that have been observed worldwide in the last three decades. We document four facts. (1) Inflation following surges tends to be persistent, with the duration of disinflation exceeding that of the initial inflation increase. (2) Surges are initially unexpected but followed by a gradual catch-up of average short-term expectations with realized inflation. (3) Long-term inflation expectations tend to exhibit increases that persist throughout disinflation. (4) Policy responses are characterized by hikes in nominal interest rates but no tightening of real rates or fiscal balances. Our findings highlight the challenges monetary authorities face in avoiding persistent inflation dynamics and anchoring expectations following large inflation surges.
Submitted. Download latest version: here
Over time, as metro-areas sprawled to the suburbs, long commutes became common. In this paper I combine motivating evidence with a structural model to show how housing policies resulting in long commutes affect singles differently than couples (and men differently than women), if evaluated in a joint housing and marriage market equilibrium. First, I show that the gender gap in commuting among singles is negligible. Second, men in couples (not women) have much longer commutes than single men, and residential choice cannot explain this difference. This suggests that commuting features gains from specialization harnessed within couples, allowing men to take better jobs. I embed this feature in a quantitative spatial model with endogenous marriage and location choices that successfully captures the commuting and location patterns by marital status. In equilibrium, gains from specialization in commuting have the following implications: as metro areas expand in the model, commuting increases most for men in couples and employment falls most for women in couples, widening gender gaps in both outcomes. However, in terms of welfare it is singles who lose the most. Couples are able to partially evade commuting costs through specialization, lower housing costs and redistributing resources within the household.
R&R at European Economic Review. Download latest version: here.
The response of housing demand to changes in interest rates is a key mechanism of monetary policy. This paper shows that the effect of monetary policy shocks, identified through high-frequency event studies, on housing demand depends on the age-structure of the market. Both across U.S. metro areas and across states, local housing prices drop more after monetary policy tightens whenever the share of population between 50 and 65 years of age is higher. If the share of population in a metro area 50-55 years old increases by one percentage point, a one standard deviation monetary policy shock depresses housing prices by an additional 0.413 percent after 3 quarters. A stronger investment motive in the demand for real estate by this age group is a possible mechanism. I show that this differential reaction of housing prices is already detectable by the quarter of the shock, and is followed by a differential response in employment starting about four quarters after the shock.
Draft coming soon.
We exploit cross-sectional variation in the response of US states to a monetary policy shock to study how the impact of monetary policy varies with the share of married women who work. We find that the economy?s response is more muted the lower the share of married women employed before the shock. We argue that a plausible explanation is a shielded demand response of households' insured by the 'added worker effect'. When women are only weakly attached to the labor market, they can flexibly enter and exit to supplement household income in times of need, providing a powerful insurance mechanism against aggregate shocks. We provide three additional pieces of evidence. First, monetary policy shocks have a stronger effect in states where married women are more firmly attached to the labor market (making fewer transitions in and out). Second, following an increase in the federal funds rate married women themselves are comparatively more likely to be employed (and to enter employment) in states where the share of married women working pre-shock is low. Third, in contrast to employment, wages of married women fall more in states where married women have worked less, consistent with a differential labor supply response to the shock.
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This paper investigates how firm leverage affects the transmission of monetary policy to labor demand. We find that expansionary monetary policy has a stronger effect on the employment of more leveraged firms but a weaker effect on their capital investment. We interpret these findings using a heterogeneous firm New Keynesian model with two types of wholesale firms facing financing constraints that differ by their leverage and a flexible constant elasticity of substitution (CES) production function of both wholesale and retail firms. In the cross-section, more leveraged firms shift to a less capital-intensive production mode in response to easing monetary policy. On the aggregate, more leverage dampens the response of capital, and thus aggregate demand. As a result, employment response is initially muted but later amplified as firms substitute capital for labor.
2020: The Outstanding Third Year Paper Award. Download latest version: here
Biannual half-day (afternoon) workshop jointly organised by Deutsche Bundesbank, European Central Bank, Frankfurt School of Finance and Management, and Goethe University Frankfurt.
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