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Author:Dupor, Bill 

Discussion Paper
Keynesian conundrum: multiplicity and time consistent stabilization
This paper identifies a novel form of dynamic inconsistency of stabilization policy in increasing returns models that generate multiple equilibria. We present a two-period version of the Benhabib-Farmer (1994) externalities model and derive closed-form solutions for all endogenous variables in every perfect foresight equilibrium. We provide conditions under which the stabilization policy that maximizes time zero consumer welfare is not time consistent. Furthermore, we characterize the time consistent stabilization policy. Our results cast doubts on the usefulness of government coordination of economic activity when the government lacks a commitment mechanism. Without commitment, a benevolent government can rule out multiplicity only by ensuring that a pareto dominated equilibrium obtains.
AUTHORS: Dupor, Bill
DATE: 1999

Working Paper
The 2008 U.S. Auto Market Collapse
New vehicle sales in the U.S. fell nearly 40 percent during the last recession, causing significant job losses and unprecedented government interventions in the auto industry. This paper explores two potential explanations for this decline: falling home values and falling households? income expectations. First, we establish that declining home values explain only a small portion of the observed reduction in vehicle sales. Using a county-level panel from the episode, we ?nd: (1) A one-dollar fall in home values reduced new vehicle spending by about 0.9 cents; and (2) Falling home values explain approximately 19 percent of the aggregate vehicle spending decline. Next, examining state-level data from 1997-2016, we ?nd: (3) The short-run responses of vehicle consumption to home value changes are larger in the 2005-2011 period relative to other years, but at longer horizons (e.g. 5 years), the responses are similar across the two sub-periods; and (4) The service ?ow from vehicles, as measured from miles traveled, responds very little to house price shocks. We also detail the sources of the di?erences between our ?ndings (1) and (2) from existing research. Second, we establish that declining current and expected future income expectations played an important role in the auto market?s collapse. We build a permanent income model augmented to include infrequent, repeated car buying. Our calibrated model matches the pre-recession distribution of auto vintages and exhibits a large vehicle sales decline in response to a moderate decline in expected permanent income. In response to the decline in permanent income, households delay replacing existing vehicles, allowing them smooth the e?ects of the income shock without signi?cantly adjusting the service ?ow from their vehicles. Combining our negative results regarding housing wealth with our positive model-based ?ndings, we interpret the auto market collapse as consistent with existing permanent income based approaches to durable goods consumption (e.g., Leahy and Zeira (2005)).
AUTHORS: Dupor, Bill; Li, Rong; Mehkari, M. Saif; Tsai, Yi-Chan
DATE: 2018-09-11

Working Paper
The 2008 U.S. Auto Market Collapse
New vehicle sales in the U.S. fell nearly 40 percent during the past recession, causing significant job losses and unprecedented government interventions in the auto industry. This paper explores three potential explanations for this decline: increasing oil prices, falling home values, and falling household income expectations. First, we use the historical macroeconomic relationship between oil prices and vehicle sales to show that the oil price spike explains roughly 15 percent of the auto sales decline between 2007 and 2009. Second, we establish that declining home values explain only a small portion of the observed reduction in household new vehicle sales. Using a county-level panel from the episode, we find (1) a one-dollar fall in home values reduced household new vehicle spending by 0.5 to 0.7 cents and overall new vehicle spending by 0.9 to 1.2 cents and (2) falling home values explain between 16 and 19 percent of the overall new vehicle spending decline. Next, examining state-level data for 1997-2016, we find (3) the short-run responses of new vehicle consumption to home value changes are larger in the 2005-2011 period relative to other years, but at longer horizons (e.g. 5 years), the responses are similar across the two sub-periods and (4) the service flow from vehicles, as measured by miles traveled, responds very little to house price shocks. We also detail the sources of the differences between our findings (1) and (2) from existing research. Third, we establish that declining current and expected future income expectations potentially played an important role in the auto market's collapse. We build a permanent income model augmented to include infrequent repeated car buying. Our calibrated model matches the pre-recession distribution of auto vintages and the liquid-wealth-to-income ratio, and exhibits a large vehicle sales decline in response to a mild decline in expected permanent income due to a transitory slowdown in income growth. In response to the shock, households delay replacing existing vehicles, allowing them to smooth the effects of the income shock without significantly adjusting the service flow from their vehicles. Augmenting our model with a richer set of household expectations allows us to match 65 percent of the overall new vehicle spending decline (i.e. roughly the portion of the decline not explained by oil prices and falling home values). Combining our negative results regarding housing wealth and oil prices with our positive model-based findings, we interpret the auto market collapse as consistent with existing permanent income based approaches to durable goods purchases (e.g., Leahy and Zeira (2005)).
AUTHORS: Dupor, Bill; Mehkari, M. Saif; Li, Rong; Tsai, Yi-Chan
DATE: 2020-01-31

Working Paper
Regional Consumption Responses and the Aggregate Fiscal Multiplier
We use regional variation in the American Recovery and Reinvestment Act (2009-2012) to analyze the effect of government spending on consumer spending. Our consumption data come from household-level retail purchases in Nielsen and auto purchases from Equifax credit balances. We estimate that a $1 increase in county-level government spending increases consumer spending by $0.18. We translate the regional consumption responses to an aggregate fiscal multiplier using a multi-region, New Keynesian model with heterogeneous agents and incomplete markets. Our model successfully generates the estimated positive local multiplier, a result that distinguishes our incomplete markets model from models with complete markets. The aggregate consumption multiplier is 0.4, which implies an output multiplier higher than one. The aggregate consumption multiplier is almost twice the local estimate because trade linkages propagate government spending across regions.
AUTHORS: Kudlyak, Marianna; Karabarbounis, Marios; Dupor, Bill; Mehkari, M. Saif
DATE: 2018-02-20

Briefing
Estimating Aggregate Fiscal Multipliers from Local Data
Variations among regions in their responses to economic policies can be used to estimate the effects of those policies at the national level while minimizing or eliminating issues of reverse causation. Recent research has employed county-level data to look at the effects of federal government spending ? in particular, the 2009?12 stimulus ? on aggregate consumption.
AUTHORS: Dupor, Bill; Karabarbounis, Marios; Kudlyak, Marianna; Mehkari, M. Saif; Price, David A.
DATE: 2018-05

Journal Article
Auto Sales and the 2007-09 Recession
The auto sector continues to play an important role in understanding recessions.
AUTHORS: Dupor, Bill
DATE: 2019-16

Journal Article
Possible Fiscal Policies for Rare, Unanticipated, and Severe Viral Outbreaks
What should guide a fiscal authority in conducting macroeconomic policy in the event of a severe viral outbreak?
AUTHORS: Dupor, Bill
DATE: 2020-06

Journal Article
The Cyclicality of the Aging U.S. Motor Vehicle Fleet
More-reliable cars may have contributed to the slow rebound of auto sales and jobs after the past recession.
AUTHORS: Dupor, Bill
DATE: 2019-26

Journal Article
The Efficacy of Enhanced Unemployment Benefits during a Pandemic
To help laid-off and furloughed workers, providing enhanced unemployment insurance benefits may be quicker and more efficient than using small business payroll loans.
AUTHORS: Dupor, Bill
DATE: 2020-01

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