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Working Paper
Modeling to Inform Economy-Wide Pandemic Policy: Bringing Epidemiologists and Economists Together
Facing unprecedented uncertainty and drastic trade-offs between public health and other forms of human well-being, policymakers during the Covid-19 pandemic have sought the guidance of epidemiologists and economists. Unfortunately, while both groups of scientists use many of the same basic mathematical tools, the models they develop to inform policy tend to rely on different sets of assumptions and, thus, often lead to different policy conclusions. This divergence in policy recommendations can lead to uncertainty and confusion, opening the door to disinformation, distrust of institutions, and ...
Working Paper
Improving Child Welfare in Middle Income Countries: The Unintended Consequence of a Pro-Homemaker Divorce Law and Wait Time to Divorce
This study identifies the impact of access to and the speed of divorce on the welfare of children in a middle income largely Catholic country. Using difference-in-difference estimation techniques, I compare school enrollment for children of married and cohabiting parent households before and after the legalization of divorce. Implementing pro-homemaker divorce laws increased school enrollment anywhere from 3.4 to 5.5 percentage points, and the effect was particularly salient on secondary school students. I provide evidence that administrative processes influencing the speed of divorce affect ...
Working Paper
Responding to COVID-19: A Note
We consider several epidemiological simulations of the COVID-19 pandemic using the textbook SIR model and discuss the basic implications of these results for crafting an adequate response to the ensuing economic crisis. Our simulations are meant to be illustrative of the findings reported in the epidemiological literature using more sophisticated models (e.g., Ferguson et al. (2020)). The key observation we stress is that moderating the epidemiological response of social distancing according to the models may come at a steep price of extending the duration of the pandemic and hence the time ...
Working Paper
Fiscal Policy during a Pandemic
I study the effects of the 2020 coronavirus outbreak in the United States and subsequent fiscal policy response in a nonlinear DSGE model. The pandemic is a shock to the utility of contact-intensive services that propagates to other sectors via general equilibrium, triggering a deep recession. I use a calibrated version of the model that matches the path of the US unemployment rate in 2020 to analyze different types of fiscal policies. I find that UI benefits are the most effective tool to stabilize income for borrowers, who are the hardest hit, while liquidity assistance programs are ...
Discussion Paper
Central Bank Solvency and Inflation
The monetary base in the United States, defined as currency plus bank reserves, grew from about $800 billion in 2008 to $2 trillion in 2012, and to roughly $4 trillion at the end of 2014 (see chart below). Some commentators have viewed this increase in the monetary base as a sure harbinger of inflation. For example, one economist wrote that this “unprecedented expansion of the money supply could make the ’70s look benign.” These predictions of inflation rest on the monetarist argument that nominal income is proportional to the money supply. The fact that the money supply has expanded ...
Discussion Paper
Soaring Tuitions: Are Public Funding Cuts to Blame?
Public colleges and universities play a vital role in training a state’s workforce, yet state support for higher education has been declining for years. As a share of total revenues for America’s public institutions of higher education, state and local appropriations have fallen every year over the past decade, dropping from 70.7 percent in 2000 to 57.1 percent in 2011. At the same time, college enrollment numbers have swelled across the country—public institutions’ rolls grew from 8.6 million full-time students in 2000 to 11.8 million in 2011. Faced with dwindling funding from the ...
Working Paper
Credit and Liquidity Policies during Large Crises
We compare firms’ financials during the Great Financial Crisis (GFC) and COVID-19. While the two crises featured similar increases in credit spreads, debt and liquid assets decreased during the GFC but increased during COVID-19. In the cross-section, leverage was the primary determinant of credit spreads and investment during the GFC, but liquidity was more important during COVID-19. We augment a quantitative model of firm capital structure with a motive to hold liquid assets. The GFC resembled a combination of productivity and financial shocks, while COVID-19 also featured liquidity ...
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 ...
Working Paper
Fiscal Policy during a Pandemic
I study the effects of the 2020 coronavirus outbreak in the United States and subsequent fiscal policy response in a nonlinear DSGE model. The pandemic is a shock to the utility of contact-intensive services that propagates to other sectors via general equilibrium, triggering a deep recession. I use a calibrated version of the model that matches the path of the US unemployment rate in 2020 to analyze different types of fiscal policies. I find that the pandemic shock changes the ranking of policy multipliers. Unemployment benefits are the most effective tool to stabilize income for borrowers, ...
Working Paper
Fiscal Policy during a Pandemic
I study the effects of the 2019-20 coronavirus outbreak in the United States and subsequent fiscal policy response in a nonlinear DSGE model. The pandemic is a shock to the utility of contact-intensive services that propagates to other sectors via general equilibrium, triggering a deep recession. I use a calibrated version of the model to analyze different types of fiscal policies. I find that UI benefits are the most effective tool to stabilize income for borrowers, who are the hardest hit, while savers may favor unconditional transfers. Liquidity assistance programs are effective if the ...