Search Results
COVID-19: Which Workers Face the Highest Unemployment Risk?
Some 46% of U.S. workers are employed in occupations at “high risk” of layoff due to COVID-19 measures. How much could it cost to offset their lost income?
Working Paper
Flight to Liquidity or Safety? Recent Evidence from the Municipal Bond Market
We examine the effects of the COVID-19 pandemic and subsequent monetary and fiscal policy actions on municipal bond market pricing. Using high-frequency trading data, we estimate key policy events at the peak of the crisis by focusing on a sample of bonds within a narrow window before and after each policy event. We find that policy interventions, in particular those with explicit credit backstops, were effective in alleviating municipal bond market stress. Next, we exploit daily variation in traded municipal bonds and virus exposure across U.S. counties. We find a shift in how bond investors ...
How Quickly Does Fiscal Policy Get Implemented?
The response to the 2007-09 recession can provide a sense of timing when it comes to implementing fiscal policy.
Working Paper
Optimal Credit Market Policy
We study optimal credit market policy in a stochastic, quantitative, general equilibrium, infinite-horizon economy with collateral constraints tied to housing prices. Collateral constraints yield a competitive equilibrium that is Pareto inefficient. Taxing housing in good states and subsidizing it in recessions leads to a Pareto-improving allocation for borrowers and savers. Quantitatively, the welfare gains afforded by the optimal tax are significant. The optimal tax reduces the covariance of collateral prices with consumption, and, by doing so, it increases asset prices on average, thus ...
Briefing
Untangling Persistent Inflation: Understanding the Factors at Work
While recent inflation numbers have been encouraging, persistent inflationary pressures remain a topic of concern and policy deliberation. This article delves into some candidate drivers of inflation persistence and their implications for monetary policy. In particular, we explore factors contributing to the persistence of inflation, such as intrinsic persistence, complementarities, indexation, unanchoring of expectations, fiscal policy and other persistent inflationary shocks.
Working Paper
Redistributive Fiscal Policies and Business Cycles in Emerging Economies
Government expenditures are pro-cyclical in emerging markets and counter-cyclical in developed economies. We show this pattern is driven by differences in social transfers. Transfers are more counter-cyclical and comprise a larger portion of spending in developed economies compared to emerging. In contrast, government expenditures on goods and services are quite similar across the two. In a small open economy model, we find disparate social transfer policies can account for more than a half of the excess volatility of consumption relative to output in emerging economies. We analyze how ...
Working Paper
Expectations-Driven Liquidity Traps: Implications for Monetary and Fiscal Policy
We study optimal monetary and fiscal policy in a New Keynesian model where occasional declines in agents' confidence give rise to persistent liquidity trap episodes. There is no straightforward recipe for enhancing welfare in this economy. Raising the inflation target or appointing an inflation-conservative central banker mitigates the inflation shortfall away from the lower bound but exacerbates deflationary pressures at the lower bound. Using government spending as an additional policy instrument worsens allocations at and away from the lower bound. However, appointing a policymaker who is ...
Possible Fiscal Policies for Rare, Unanticipated and Severe Viral Outbreaks
What should guide a fiscal authority in conducting macroeconomic policy in the event of a severe viral outbreak?
Working Paper
Employment and Welfare Effects of the Quota for Disabled Workers in Brazil
I study the effect of a quota for disabled workers on the labor market and on welfare. Using a task-based model, I show that the effect of a quota will depend on the productivity of disabled workers and their labor supply elasticity. I estimate the productivity of disabled workers using variation from inspections of the quota. I find that the quota increased the hiring of disabled workers, but it reduced wages and employment of non-disabled workers, suggesting that the quota reduced firms’ productivity. I estimate the labor supply elasticity of disabled workers using heterogeneous exposure ...