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Working Paper
Bargaining Under Liquidity Constraints: Nash vs. Kalai in the Laboratory
We report on an experiment in which buyers and sellers engage in semi-structured bargaining in two dimensions: how much of a good the seller will produce and how much money the buyer will offer the seller in exchange. Our aim is to evaluate the empirical relevance of two axiomatic bargaining solutions, the generalized Nash bargaining solution and Kalai's proportional bargaining solution. These bargaining solutions predict different outcomes when buyers are constrained in their money holdings. We first use the case when the buyer is not liquidity constrained to estimate the bargaining power ...
Newsletter
What Is the Impact of Monetary Policy on Households’ Desired Labor Supply?
Do people adjust how much they want to work when the central bank’s monetary policy stance shifts? More specifically, does an interest rate hike induce individuals to work more or fewer hours? And does this effect differ across households with different levels of income (or earnings)? In this article, we discuss our recent research that explores these and related questions. One notable finding is that employed individuals at the bottom of the income distribution want to work more when monetary policy tightens.
Working Paper
On the Mechanics of Fiscal Inflations
The goal of this paper is twofold. First, we wish to better explain the relationship between Sargent and Wallace’s (1981) unpleasant monetarist arithmetic, the closely connected fiscal theory of the price level (FTPL), and the monetarist view of inflation. Second, we discuss how the recent inflationary episode has contributed to redistributing real resources from holders of government debt to the public purse. In particular, financial prices before the onset of the Covid pandemic suggest that investors viewed an inflationary shock such as the one we experienced as extremely unlikely, so the ...