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Working Paper
Risk Aversion at the Country Level
Hernandez-Murillo, Ruben; Gandelman, Nestor (2014-02-01)
In this paper we provide estimates of the coefficient of relative risk aversion for 80 countries using data on self-reports of personal well-being from the Gallup World Poll. For most countries we cannot reject the null hypothesis that the coefficient of relative risk aversion equals 1. We conclude that our result supports the use of the log utility function in numerical simulations.
Working Papers , Paper 2014-5

Working Paper
Inflation Levels and (In)Attention
Bracha, Anat; Tang, Jenny (2022-01-01)
Inflation expectations are key determinants of economic activity and are central to the current policy debate about whether inflation expectations will remain anchored in the face of recent pandemic-related increases in inflation. This paper explores evidence of inattention by constructing two different measures of consumers’ inattention and documents greater inattention when inflation is low. This suggests that there is indeed a risk of an acceleration in the increases in inflation expectations if actual inflation remains high.
Working Papers , Paper 22-4

Working Paper
The Impact of Global Uncertainty on the Global Economy, and Large Developed and Developing Economies
Ratti, Ronald A.; Vespignani, Joaquin L.; Kang, Wensheng (2017-01-01)
Global uncertainty shocks are associated with a sharp decline in global inflation, global growth and in the global interest rate. Over 1981 to 2014 global financial uncertainty forecasts 18.26% and 14.95% of the variation in global growth and global inflation respectively. Global uncertainty shocks have more protracted, statistically significant and substantial effects on global growth, inflation and interest rate than U.S. uncertainty shocks. U.S. uncertainty lags global uncertainty by one month. When controlling for domestic uncertainty, the decline in output following a rise in global ...
Globalization Institute Working Papers , Paper 303

Working Paper
Optimal Fiscal Policy with Recursive Preferences
Karantounias, Anastasios G. (2013-09-01)
I study the implications of recursive utility, a popular preference specification in macrofinance, for the design of optimal fiscal policy. Standard Ramsey tax-smoothing prescriptions are substantially altered. The planner overinsures by taxing less in bad times and more in good times, mitigating the effects of shocks. At the intertemporal margin, there is a novel incentive for introducing distortions that can lead to an ex-ante capital subsidy. Overall, optimal policy calls for a much stronger use of debt returns as a fiscal absorber, leading to the conclusion that actual fiscal policy is ...
FRB Atlanta Working Paper , Paper 2013-07

Working Paper
The cost of fiscal policy uncertainty: industry evidence of its impact on the labor market
Wang, J. Christina (2013-12-01)
The anemic pace of the recovery of the U.S. economy from the Great Recession has frequently been blamed on heightened uncertainty, much of which concerns the nation's fiscal policy. Intuition suggests that increased policy uncertainty likely has different impacts on industries with different exposure to government actions. Such heterogeneity can help identify the effect of shocks due to policy uncertainty. This study uses industry data to explore whether policy uncertainty indeed affects the dynamics of employment during this recovery, and particularly whether it has a differential impact on ...
Working Papers , Paper 13-22

Working Paper
Insurance and Inequality with Persistent Private Information
Bloedel, Alex; Krishna, R. Vijay; Leukhina, Oksana (2018-09-07)
We study optimal insurance contracts for an agent with Markovian private information. Our main results characterize the implications of constrained efficiency for long-run welfare and inequality. Under minimal technical conditions, there is Absolute Immiseration: in the long run, the agent?s consumption and utility converge to their lower bounds. When types are persistent and utility is unbounded below, there is Relative Immiseration: low-type agents are immiserated at a faster rate than high-type agents, and ?pathwise welfare inequality? grows without bound. These results extend and ...
Working Papers , Paper 2018-20

Working Paper
Insurance and Inequality with Persistent Private Information
Krishna, R. Vijay; Leukhina, Oksana; Bloedel, Alex (2020-10-20)
This paper studies the optimal tradeoff between insurance and inequality in economies with persistent private information.We consider a principal-agent model in which the principal insures the agent against privately-observed shocks to his endowment, which follows an ergodic finite-state Markov chain that may exhibit arbitrary serial correlation. The optimal contract always induces immiseration: the agent’s consumption and utility become arbitrarily negative in the long run. When the endowment is positively serially correlated, the optimal contract provides increasingly high-powered ...
Working Papers , Paper 2018-020

Working Paper
Uncertainty and Growth Disasters
Jovanovic, Boyan; Ma, Sai (2020-05-07)
This paper documents several stylized facts on the real effects of economic uncertainty. First, higher uncertainty is associated with a more dispersed and negatively skewed distribution of output growth. Second, the response of economic growth to an increase in uncertainty is highly nonlinear and asymmetric. Third, higher asset volatility magnifies the negative impact of uncertainty on growth. We develop and estimate an analytically tractable model in which rapid adoption of new technology may raise economic uncertainty which causes measured productivity to decline. The equilibrium growth ...
International Finance Discussion Papers , Paper 1279

Speech
Remarks at the Fifth Data Management Strategies and Technologies Workshop
McAndrews, James J. (2014-04-08)
Remarks at the Fifth Data Management Strategies and Technologies Workshop, Federal Reserve Bank of New York, New York City
Speech , Paper 131

Working Paper
Asymmetric firm dynamics under rational inattention
Cheremukhin, Anton A.; Tutino, Antonella (2014-10-01)
We study the link between business failures, markups and business cycle asymmetry in the U.S. economy with a model of optimal firm exit under rational inattention. We show that the model's predictions of lagged, counter-cyclical and positively skewed markups together with counter-cyclical exit rates are consistent with the empirical evidence. Moreover, our model uncovers a new mechanism that links information processing with the business cycle. It predicts counter-cyclical attention to economic conditions consistent with survey evidence.
Working Papers , Paper 1411

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