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How Much Are We “Taxed” by Surprise Inflation?
When inflation surprises to the upside, borrowers pay back less in real terms. And Uncle Sam is America’s biggest borrower.
How Does Human Capital Affect Wealth Inequality?
Accounting for human capital can change the distribution of wealth and some common measures of wealth inequality.
Attention and Fluctuations in Macroeconomic Uncertainty
This paper studies a dispersed information economy in which agents can exert costly attention to learn about an unknown aggregate state of the economy. Under certain conditions, attention and four measures of uncertainty are countercyclical: Agents pay more attention when they expect the economy to be in a bad state, and their reaction generates higher (i) aggregate output volatility, (ii) cross-sectional output dispersion, (iii) forecast dispersion about aggregate output, and (iv) subjective uncertainty about aggregate output faced by each agent. All these phenomena are prominent features of ...
Monetary Policy Surprises and Inflation Expectations
The private sector may slightly underestimate the short-term impact of monetary policy surprises on inflation but may predict longer-term effects fairly well.
Asset supply and liquidity transformation in HANK
We study how the financial sector affects fiscal and monetary policy in heterogeneous agent New Keynesian (HANK) economies. We show that, in a large class of models of financial intermediation, relevant features of the financial sector are summarized by the elasticities of a liquid asset supply function. The financial sector in these models affects aggregate responses only through its ability to perform liquidity transformation (i.e., issue liquid assets to finance illiquid capital). If liquid asset supply responds inelastically to returns on capital (low cross-price elasticities), ...