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Wealth and Volatility
Periods of low household wealth in United States macroeconomic history have also been periods of high business cycle volatility. This paper develops a simple model that can exhibit self-fulfilling fluctuations in the expected path for unemployment. The novel feature is that the scope for sunspot-driven volatility depends on the level of household wealth. When wealth is high, consumer demand is largely insensitive to unemployment expectations and the economy is robust to confidence crises. When wealth is low, a stronger precautionary motive makes demand more sensitive to unemployment ...
Working Paper
Pandemic and War Inflation: Lessons from the International Experience
This paper examines the drivers of the 2020-23 inflation surge, with an emphasis on the similarities and differences across countries, as well as the role that monetary policy frameworks might have played in shaping central banks' responses. The inflation surge in the U.S. and abroad was set in motion by two global events: the COVID-19 pandemic and Russia's invasion of Ukraine. Pandemic-related supply disruptions, a rotation of consumer spending toward goods, and commodity price increases exacerbated by Russia's invasion of Ukraine resulted in unusually large relative price increases, which ...