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Author:Schwartzman, Felipe 

Working Paper
What Do Sectoral Dynamics Tell Us About the Origins of Business Cycles?

We use economic theory to rank the impact of structural shocks across sectors. This ranking helps us to identify the origins of U.S. business cycles. To do this, we introduce a Hierarchical Vector Auto-Regressive model, encompassing aggregate and sectoral variables. We find that shocks whose impact originate in the "demand" side (monetary, household, and government consumption) account for 43 percent more of the variance of U.S. GDP growth at business cycle frequencies than identified shocks originating in the "supply" side (technology and energy). Furthermore, corporate financial shocks, ...
Working Paper , Paper 19-9

Working Paper
Selection and monetary non-neutrality in time-dependent pricing models

Given the frequency of price changes, the real effects of a monetary shock are smaller if adjusting firms are disproportionately likely to be ones with prices set before the shock. This selection effect is important in a large class of sticky-price models with time-dependent price adjustment. We characterize conditions on the distribution of the duration of price spells associated with the real effects of monetary shocks, and provide a very general analytical characterization of the real effects of such shocks. We find that: 1) Selection is stronger and real effects are smaller if the hazard ...
Working Paper , Paper 12-09

Working Paper
Climate Defaults and Financial Adaptation

We analyze the relationship between climate-related disasters and sovereign debt crises using a model with capital accumulation, sovereign default, and disaster risk. We find that disaster risk and default risk together lead to slow post-disaster recovery and heightened borrowing costs. Calibrating the model to Mexico, we find that the increase in cyclone risk due to climate change leads to a welfare loss equivalent to a permanent 1% consumption drop. However, financial adaptation via catastrophe bonds and disaster insurance can reduce these losses by about 25%. Our study highlights the ...
Working Paper , Paper 23-06

Journal Article
Inequality Across and Within US Cities around the Turn of the Twenty-First Century

We review key facts about inequality across and within US cities around the turn of the twenty-first century and discuss theoretical interpretations. Large cities are cities with a greater proportion of skilled workers. In those large and skill-intensive cities, wages are overall higher but are offset by higher rents. Those higher wages are particularly prevalent among high-skilled workers, so that the skill premium increases with city size and skill mix. Over the last few decades, these facts have become increasingly salient. We discuss possible explanations for these facts with the help of ...
Economic Quarterly , Issue Q1-Q4 , Pages 1-35

Journal Article
Inflation Target Zones as a Commitment Mechanism

Economic Quarterly , Volume 3Q , Pages 115-132

Journal Article
When do credit frictions matter for business cycles?

Since the Great Recession there has been renewed interest in introducing credit frictions in business cycle models. However, in order for credit frictions to be quantitatively meaningful and qualitatively realistic in business cycles, it is necessary to depart from conventional assumptions about production technology or preferences and/or add additional frictions. This article reviews some of those departures and additions.
Economic Quarterly , Volume 98 , Issue 3Q , Pages 209-230

Journal Article
The Heterogeneous Business-Cycle Behavior of Industrial Production

This paper collects stylized facts about the cyclical properties of industry-level data. Those can provide a window into the sources of business cycles as well as propagation mechanisms. We find (i) goods that are more durable or that have higher wealth elasticity are more cyclical, (ii) sectors tied to the government tend to lag business cycles, (iii) sectors with nominal frictions tend to lag business cycles, (iv) sectors in which financial frictions are likely to be important tend to lag business cycles, and (v) industries that are highly integrated tend to lead business cycles.
Economic Quarterly , Issue 3Q , Pages 227-260

Working Paper
Does Redistribution Increase Output? The Centrality of Labor Supply

The aftermath of the recent recession has seen numerous calls to use transfers to poorer households as a means to enhance aggregate activity. We show that the key to understanding the direction and size of such interventions lies in labor supply decisions. We study the aggregate impact of short-term redistributive economic policy in a standard incomplete-markets model. We characterize analytically conditions under which redistribution leads to an increase or decrease in effective hours worked, and hence, output. We then show that under the parameterization that matches the wealth distribution ...
Working Paper , Paper 14-4

Journal Article
How Can Consumption-Based Asset-Pricing Models Explain Low Interest Rates?

The real interest rate is at historically low levels following the Great Recession. This article examines under which conditions the leading consumption-based asset-pricing models can give rise to such a reduction. In particular, we examine implications of standard constant relative risk aversion preference models with Gaussian shocks, models with consumption disaster, models with long-run risk, and models with habit formation. Given the models reviewed, the high-risk premium suggests that low interest rates in the recent period are likely to be either a consequence of a perception that ...
Economic Quarterly , Issue 3Q , Pages 209-240

COVID Transfers Dampening Employment Growth, but Not Necessarily a Bad Thing

Overall employment levels have remained below their pre-pandemic level and are growing only slowly despite rising wages and vacancies. In this Economic Brief, we examine whether historically high government support may have empowered workers to pull back from labor markets. While that support presents a clear benefit to recipients, a simple calculation based on recent estimates indicates that transfers of close to $2 trillion to households approved over the course of 2020 and 2021 implies a reduction of 0.58 percentage points in the employment-to-population ratio.
Richmond Fed Economic Brief , Volume 21 , Issue 39




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