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Working Paper
Real business cycle dynamics under first-order risk aversion
This paper incorporates preferences that display first-order risk aversion (FORA) into a standard real business cycle model. Although FORA preferences represent a sharp departure from the expected utility/constant relative risk aversion (EU/CRRA) preferences common in the business cycle literature, the change has only a negligible effect on the model s second moment implications. In fact, for what I argue is an empirically reasonable "ballpark" calibration of the FORA preferences, the moment implications are essentially identical to those under EU/CRRA, while the welfare cost of aggregate ...
Dallas Fed Mobility and Engagement Index Gives Insight into COVID-19’s Economic Impact
To gain insight into the economic impact of the pandemic, we developed an index of mobility and engagement, based on geolocation data collected from a large sample of mobile devices.
Room to Grow? Inflation and Labor Market Slack
Compared with the usual ex-food-and-energy measure, the Dallas Fed’s Trimmed Mean PCE inflation rate sends a clearer, more reliable signal about whether cyclical inflation pressures are building.
Working Paper
On the political economy of immigration and income redistribution
In this paper, we study several general equilibrium models in which the agents in an economy must decide on the appropriate level of immigration into the country. Immigration does not enter directly into the native agents' utility functions, and natives have identical preferences over consumption goods. However, natives may be endowed with different amounts of capital, which alone gives rise to alternative levels of desired immigration, We show that the natives' preferences over desired levels of immigration are influenced by the prospect that new immigrants will be voting in the future, ...
Working Paper
The dynamics of immigration policy with wealth-heterogeneous immigrants
In this paper we consider a simple intertemporal economy in which immigrants, if admitted, bring heterogeneous amounts of capital. We show that under certain conditions there is a level of immigration which maximizes the economy's capital-labor ratio, and that this level of immigration is the preferred choice of a majority of the economy's citizens. We then characterize, in an overlapping generations setting, the dynamics of capital accumulation and immigration policy, which can include multiple steady state equilibria and a sensitivity of immigration levels to changes in the economy's ...
Working Paper
Trimmed mean PCE inflation
Research over the past decade has led to improved measures of core inflation in the Consumer Price Index, or CPI. This paper discusses the application of some of the insights and techniques of that line of research to the Federal Reserve Bard of Governors? preferred inflation gauge, the price index for Personal Consumption Expenditures (PCE). The result is a new measure of core PCE inflation?the trimmed mean PCE?and a somewhat different characterization of the economy?s recent inflation experience. ; Compared to the story told by the usual ?excluding food and energy? measure, the trimmed mean ...
Working Paper
The Politics of Flat Taxes
We study the political determination of flat tax systems using a workhorse macroeconomic model of inequality. There is significant variation in preferred tax policy across the wealth and income distribution. The majority voting outcome features (i) zero labor income taxation, (ii) simultaneous use of capital income and consumption taxation, and (iii) essentially zero transfers. This policy is supported by a coalition of low- and middle-wealth households. Zero labor income taxation is supported by households with below average wealth, while the middle-wealth households prefer to keep the ...
Surging House Prices Expected to Propel Rent Increases, Push Up Inflation
The inflation rates of rent and owners’ equivalent rent (OER)—the amount of rent equivalent to the cost of ownership—have declined sharply since the COVID-19 pandemic began in February 2020. However, we expect rent inflation and OER inflation to accelerate in the years to come.
Journal Article
The national economy: heading for a dip?
Working Paper
Inequality, inflation, and central bank independence
What can account for the different contemporaneous inflation experiences of various countries, and of the same country over time? We present an analysis of the determination of inflation from a political economy perspective. We document a positive correlation between income inequality and inflation and then present a theory of the determination of inflation outcomes in democratic societies that illustrates how greater inequality leads to greater inflation, owing to a desire by voters for wealth redistribution. We conclude by showing that democracies with more independent central banks tend to ...