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Working Paper
Plants in Space
We study the number, size, and location of a firm's plants. The firm's decision balances the benefit of delivering goods and services to customers using multiple plants with the cost of setting up and managing these plants and the potential for cannibalization that arises as their number increases. Modeling the decisions of heterogeneous firms in an economy with a vast number of widely distinct locations is complex because it involves a large combinatorial problem. Using insights from discrete geometry, we study a tractable limit case of this problem in which these forces operate at a local ...
Working Paper
What Inventory Behavior Tells Us About How Business Cycles Have Changed
Beginning in the mid-1980s, the nature of U.S. business cycles changed in important ways, as made evident by distinctive shifts in the comovement and relative volatilities of key economic aggregates. These include labor productivity, hours, output, and inventories. Unlike the widely documented change in absolute volatility over that period, known as the Great Moderation, these shifts in comovement and relative volatilities persist into the Great Recession. To understand these changes, we exploit the fact that inventory data are informative about sources of business cycles. Specifically, they ...
Journal Article
Changes in monetary policy and the variation in interest rate changes across credit markets
This article uses principal component methods to assess the importance of changes in the federal funds rate in driving interest rate changes across a broad array of credit markets. We find that most of the variability in interest rate changes across these markets is explained by a small number of common components. Furthermore, for many of the interest rate series in our sample, changes that reflect common movements are highly correlated with changes in the federal funds rate. However, in some credit markets associated with longer maturities, such as the mortgage market, common movements are ...
Journal Article
Idiosyncratic Sectoral Growth, Balanced Growth, and Sectoral Linkages
We study the growth properties of an economy where different sectors are linked by way of intermediates and potentially grow at different rates. We characterize the economy's equilibrium balanced growth path, and derive an analytical expression that summarizes how TFP growth in a given sector affects value added growth in every other sector and, therefore, aggregate GDP growth. We show in a special case that a version of Hulten's (1978) theorem, whereby the effects of changes in sector-specific productivity on GDP are entirely captured by that sector's share in GDP, also holds in growth rates ...
Briefing
What trends exist in regional housing market data?
While analysts have devoted much attention to housing market performance at the national, state, and even local level, far less attention has been paid to housing markets at the regional level. We investigate how regional vacancies, population, net migration, and other demographic variables have affected regional housing activity over several recent business cycles.
Briefing
Using Inventories to Help Explain Post-1984 Business Cycles
Real business cycle (RBC) models have been highly successful at explaining business cycles that occurred before 1984. But since then, shifts in comovements and relative volatilities of key economic aggregates have challenged their preeminence. One possible refinement of the standard RBC model is to include multiple stages of production. This extension allows researchers to use inventory data to estimate the discount rate that firms use to assess future income streams. The results indicate that variations in the discount rate reflect financial frictions that have become significant drivers of ...
Journal Article
Employment Effects of COVID-19 across States, Sectors
The COVID-19 pandemic generated sharp losses in employment in early 2020, followed by a partial but incomplete recovery that continues to this day. The effects on employment in business sectors that produce goods and those that provide services varied substantially across states. This was the case during both the initial drop and the subsequent recovery. The extent of the cross-state variation and how the variation has evolved over time has been unlike any past recessions, making the pandemic recession and recovery unprecedented in both its severity and its uneven impact.
Journal Article
From Stylized to Quantitative Spatial Models of Cities
This paper describes the progression from a standard monocentric model of a city to its analog in the quantitative spatial framework recently reviewed by Redding and Rossi-Hansberg (forthcoming). In this progression, we preserve the basics of preferences, technology, and endowments across models. The monocentric model allows for many of a city's characteristics to be endogenous, including size, population, wages, and commercial and residential land rents, but it is also highly stylized. In contrast, quantitative spatial models impose far fewer restrictions in the way that these variables ...