Search Results
Journal Article
M2 and monetary policy: a critical review of the recent debate
Could More Progressive Taxes Increase Income Inequality?
One paper posits that making taxes more progressive could boost lower-income households initially, but more money would eventually float to those with higher incomes.
International factors broadly explain postpandemic inflation
The recent co-movement of inflation across countries, including the U.S., can be explained in part by global and regional factors. Policymakers, who have tended to more closely look closer to home may want to more broadly consider global events and pressures when addressing changing inflation pressures.
Journal Article
Sudden Stops and COVID-19: Lessons from Mexico’s History
The COVID-19 pandemic produced a sharp contraction in capital flows in emerging markets during the spring of 2020. Such contractions are known as “sudden stops” and historically have been associated with significant downturns in a country’s economic activity. Evidence from Mexico’s financial crisis history suggests that sudden stops tend to exhibit a common pattern: the crisis lasts one to two years before a rapid but partial recovery, followed by years of protracted stagnation.
Report
Estimating Macroeconomic Models of Financial Crises: An Endogenous Regime-Switching Approach
We estimate a workhorse dynamic stochastic general equilibrium (DSGE) model with an occasionally binding borrowing constraint. First, we propose a new specification of the occasionally binding constraint, where the transition between the unconstrained and constrained states is a stochastic function of the leverage level and the constraint multiplier. This specification maps into an endogenous regime-switching model. Second, we develop a general perturbation method for the solution of such a model. Third, we estimate the model with Bayesian methods to fit Mexico’s business cycle and ...
Working Paper
Tax Progressivity, Economic Booms, and Trickle-Up Economics
We propose a method to decompose changes in the tax structure into a component measuring the level of taxes and a component orthogonal to the level that measures progressivity. While our focus is on the progessivity results, we find that the level shock is similar to standard tax shocks found in the empirical literature in that a rise in the level is contractionary. An increase in tax progressivity sets off an economic boom. Those at the bottom of the income distribution (who are constrained hand-to-mouth consumers) set off a consumption boom that expands the overall economy. Those at the top ...
Working Paper
Estimating Macroeconomic Models of Financial Crises: An Endogenous Regime-Switching Approach
We estimate a workhorse DSGE model with an occasionally binding borrowing constraint. First, we propose a new specification of the occasionally binding constraint, where the transition between the unconstrained and constrained states is a stochastic function of the leverage level and the constraint multiplier. This specification maps into an endogenous regime-switching model. Second, we develop a general perturbation method for the solution of such a model. Third, we estimate the model with Bayesian methods to fit Mexico's business cycle and financial crisis history since 1981. The estimated ...
Working Paper
Tax Progressivity, Economic Booms and Trickle-Up Economics
We propose a method to decompose changes in the tax structure into orthogonal components measuring the level and progressivity of taxes. Similar to tax shocks found in the existing empirical literature, the level shock is contractionary. The tax progressivity shock is expansionary: Increasing tax progressivity raises (lowers) disposable income at the bottom (top) end of the income distribution by shifting the tax burden from the bottom to the top. If agents’ marginal propensity to consume falls with income, the rise in consumption at the bottom more than compensates for the decline in ...
Working Paper
Tax Progressivity, Economic Booms, and Trickle-Up Economics
We propose a method to decompose changes in the tax structure into orthogonal components measuring the level and progressivity of taxes. While our focus is on the progessivity results, we find that the level shock is similar to standard tax shocks found in the empirical literature in that a rise in the level is contractionary. We find that an increase in tax progressivity sets off an economic boom. When tax progressivity increases, those at the bottom of the income distribution experience an increase in disposable income; these consumers have a high marginal propensity to consume, and this ...