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Working Paper
Does Unemployment Risk Affect Business Cycle Dynamics?
In this paper, I show that the decline in household consumption during unemployment spells depends on both liquid and illiquid asset positions. I also provide evidence that unemployment spells predict the withdrawal of illiquid assets, particularly when households have few liquid assets. Motivated by these findings, I embed endogenous unemployment risk in a two-asset heterogeneous-agent New Keynesian model. The model is consistent with the above evidence and provides a new propagation mechanism for aggregate shocks due to a flight-to-liquidity that occurs when unemployment risk rises. This ...
Working Paper
Pandemic Recessions and Contact Tracing
We study contact tracing in a new macro-epidemiological model in which infected agents may not show any symptoms of the disease and the availability of tests to detect these asymptomatic spreaders of the virus is limited. Contact tracing is a testing strategy aiming at reconstructing the infection chain of newly symptomatic agents. A coordination failure arises as agents fail to internalize that their individual consumption and labor decisions raise the number of traceable contacts to be tested, threatening the viability of the tracing system. The collapse of the tracing system considerably ...