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Working Paper
Perceptions about Monetary Policy
We estimate perceptions about the Federal Reserve’s monetary policy rule from panel data on professional forecasts of interest rates and macroeconomic conditions. The perceived dependence of the federal funds rate on economic conditions varies substantially over time, including over the monetary policy cycle. Forecasters update their perceptions about the Fed’s policy rule in response to monetary policy actions, measured by high-frequency interest rate surprises, suggesting that they have imperfect information about this rule. Monetary policy perceptions matter for monetary transmission, ...
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Workers’ Perceptions of Earnings Growth and Employment Risk
In addition to realized earnings and employment shocks, forward-looking individuals are presumed to condition their consumption and labor supply decisions on their subjective beliefs about future labor market risks. This paper uses rich panel data to document considerable individual heterogeneity in earnings growth expectations and in the perceived likelihood of voluntary and involuntary job exits. We examine how expectations evolve over the working life and business cycle, and how they co-vary with macroeconomic expectations and personal experiences. While largely consistent with patterns in ...
Working Paper
Sovereign Debt Restructuring and Credit Recovery
This paper focuses on the significant growth of domestic credit once the debt is restructured and shows that is not correlated with the size of the haircut. Second, it performs an event study around Ecuador’s sovereign default and restructuring of 2008-2009 to study changes in domestic bank lending behavior. After external debt restructuring, private lending increased the most for banks highly exposed to public debt. Finally, it provides a simple model were uncertainty about the return on government external debt during default has spillover effects on the domestic economy by creating ...
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Expectations Data in Structural Microeconomic Models
A growing literature uses now widely available data on beliefs and expectations in the estimation of structural models. In this chapter, we review this literature, with an emphasis on models of individual and household behavior. We first show how expectations data have been used to relax strong assumptions about beliefs and outline how they can be used in estimation to substitute for, or as a complement to, data on choices. Next, we discuss the literature that uses different types of expectations data in the estimation of structural models. We conclude by noting directions for future research.
Working Paper
The Role of News about TFP in U.S. Recessions and Booms
We develop a general equilibrium model to study the historical contribution of TFP news to the U.S. business cycle. Hiring frictions provide incentives for firms to start hiring ahead of an anticipated improvement in technology. For plausibly calibrated hiring costs, employment gradually rises in response to positive TFP news shocks even under standard preferences. TFP news shocks are identified mainly by current and expected unemployment rates since periods in which average unemployment is relatively high (low) are also periods in which average TFP growth is slow (fast). We work out the ...