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Working Paper
Bubbly Recessions
Hanson, Andrew; Phan, Toan; Biswas, Siddhartha (2018-02-22)
We develop a tractable rational bubbles model with financial frictions, downward nominal wage rigidity, and the zero lower bound. The interaction of financial frictions and nominal rigidities leads to a "bubbly pecuniary externality," where competitive speculation in risky bubbly assets can result in excessive investment booms that precede inefficient busts. The collapse of a large bubble can push the economy into a "secular stagnation" equilibrium, where the zero lower bound and the nominal wage rigidity constraint bind, leading to a persistent and inefficient recession. We evaluate a ...
Working Paper , Paper 18-5

Working Paper
Trade Costs and Inflation Dynamics
Cuba-Borda, Pablo A.; Queraltó, Albert; Reyes-Heroles, Ricardo M.; Scaramucci, Mikaël (2025-03-04)
We explore how shocks to trade costs affect inflation dynamics in the global economy. We exploit bilateral trade flows of final and intermediate goods together with the structure of static trade models that deliver gravity equations to identify exogenous changes in trade costs between countries. We then use a local projections approach to assess the effects of trade cost shocks on consumer price (CPI) inflation. Higher trade costs of final goods lead to large but short-lived increases in inflation, while increases in trade costs of intermediate goods generate small but persistent increases in ...
Working Papers , Paper 2508

Report
Behavior and the Transmission of COVID-19
Kopecky, Karen A.; Zha, Tao; Atkeson, Andrew (2021-02-04)
We show that a simple model of COVID-19 that incorporates feedback from disease prevalence to disease transmission through an endogenous response of human behavior does a remarkable job fitting the main features of the data on the growth rates of daily deaths observed across a large number countries and states of the United States from March to November of 2020. This finding, however, suggests a new empirical puzzle. Using an accounting procedure akin to that used for Business Cycle Accounting as in Chari et al. (2007), we show that when the parameters of the behavioral response of ...
Staff Report , Paper 618

Journal Article
The U.S. flow of funds accounts and their uses
Teplin, Albert M. (2001-07)
The U.S. flow of funds accounts compiled by the Board of Governors provide a broadly consistent set of time-series data for tracking funds as they move from economic sectors that serve as sources of capital to sectors that use the capital to acquire physical and financial assets. They present a wide range of data organized by financial instrument and by sector. With statistics extending back more than a half a century, the accounts document financial developments, provide means for studying macroeconomic behavior, and are used for policy purposes. This article briefly describes the accounts ...
Federal Reserve Bulletin , Volume 87 , Issue Jul

Working Paper
Social Distancing and Supply Disruptions in a Pandemic
Bodenstein, Martin; Guerrieri, Luca; Corsetti, Giancarlo (2020-04-17)
Drastic public health measures such as social distancing or lockdowns can reduce the loss of human life by keeping the number of infected individuals from exceeding the capacity of the health care system but are often criticized because of the social and the economic cost they entail. We question this view by combining an epidemiological model, calibrated to capture the spread of the COVID-19 virus, with a multisector model, designed to capture key characteristics of the U.S. Input Output Tables. Our two-sector model features a core sector that produces intermediate inputs not easily replaced ...
Finance and Economics Discussion Series , Paper 2020-031

Report
A Parsimonious Behavioral SEIR Model of the 2020 COVID Epidemic in the United States and the United Kingdom
Atkeson, Andrew (2021-02-04)
I present a behavioral epidemiological model of the evolution of the COVID epidemic in the United States and the United Kingdom over the past 12 months. The model includes the introduction of a new, more contagious variant in the UK in early fall and the US in mid December. The model is behavioral in that activity, and thus transmission, responds endogenously to the daily death rate. I show that with only seasonal variation in the transmission rate and pandemic fatigue modeled as a one-time reduction in the semi-elasticity of the transmission rate to the daily death rate late in the year, the ...
Staff Report , Paper 619

Working Paper
Debt Limits and Credit Bubbles in General Equilibrium
Phan, Toan; Vailakis, Yiannis; Martins-da-Rocha, V. Filipe (2019-10-11)
We provide a novel characterization of self-enforcing debt limits in a general equilibrium framework of risk sharing with limited commitment, where defaulters are subject to recourse (a fractional loss of current and future endowments) and exclusion from future credit. We show that debt limits are exactly equal to the present value of recourse plus a credit bubble component. We provide applications to models of sovereign debt, private collateralized debt, and domestic public debt. Implications include an original equivalence mapping among distinct institutional arrangements, thereby ...
Working Paper , Paper 19-19

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