Search Results
Working Paper
Adverse Selection, Risk Sharing and Business Cycles
I consider a real business cycle model in which agents have private information about an idiosyncratic shock to their value of leisure. I consider the mechanism design problem for this economy and describe a computational method to solve it. This is an important contribution of the paper since the method could be used to solve a wide class of models with heterogeneous agents and aggregate uncertainty. Calibrating the model to U.S. data I find a striking result: That the information frictions that plague the economy have no effects on business cycle fluctuations.
Journal Article
A Simple Model of Gross Worker Flows across Labor Market States
The author develops a simple model of the gross flows of workers across labor market states that is based on Krusell et al. (2012). Its simplicity allows for analytical derivations that make the determination of these flows transparent. Moreover, he finds that if errors in the classification of agents? labor market states are introduced and allowed to vary over time, the model has the ability to generate business cycle dynamics similar to those observed in the U.S. data. However, its dynamics are driven essentially by exogenous factors, not endogenous ones.
Working Paper
Search, self-insurance and job-security provisions
We construct a general equilibrium model to evaluate the quantitative effects of severance payments in the presence of contracting and reallocational frictions. Key elements of the model are: 1) establishment level dynamics, 2) imperfect insurance markets, and 3) variable search decisions. Contrary to previous studies that analyzed severance payments in frictionless environments, we find that severance payments reduce unemployment, produce negative insurance effects and improve levels.
Working Paper
Labor market policies in an equilibrium search model
We explore to what extent differences in employment and unemployment across economies can be generated by differences in labor market policies. We use a version of the Lucas-Prescott equilibrium search model with undirected search and endogenous labor-force participation. Minimum wages, degree of unionization, firing taxes, and unemployment benefits are introduced and their effects analyzed. When the model is calibrated to US observations it reproduces several of the elasticities of employment and unemployment with respect to changes in policies reported in the empirical literature. We find ...
Newsletter
Why Housing Has Been So Strong, but Might Not Be for Long
The current monetary policy tightening cycle has seen the fastest increases in the fed funds rate in more than 40 years. While not all tightening cycles have led to significant increases in mortgage rates (e.g., the 1988, 2016, and 2004 cycles), this time around mortgage rates have increased by close to 400 basis points (bps) in the first seven months since lift off (see figure A1 in the appendix). In this Chicago Fed Letter, we describe how this increase has shaped (and is still shaping) the dynamics of the housing sector.
Newsletter
Dollarization in Argentina
Journal Article
A Monetarist View of the Fed’s Balance Sheet Normalization Period
The Federal Reserve currently holds over $4 trillion in fixed-income assets. However, since the fall of 2017 the Fed has been in a ?balance sheet normalization period,? during which the size of its balance sheet is gradually shrinking over time. In particular, the Federal Open Market Committee (FOMC) has been instructing the Federal Reserve trading desk to reduce its security holdings by reinvesting principal payments only to the extent that these payments exceed gradually raising caps. These caps on redemptions will be maintained until the Fed considers that its balance sheet has reached a ...
Working Paper
Firing costs and business cycle fluctuations
This paper evaluates to what extent the introduction of firing costs can affect the aggregate dynamics of a neoclassical growth model with heterogeneous establishments. Similarly to the previous literature, firing costs are found to have large steady-state effects. However, they have no important effects on business cycle dynamics: Aggregate employment fluctuations are somewhat smaller when the firing costs are introduced, but most of the effects turn out to be insignificant.
Journal Article
Worker flows and matching efficiency
Although job vacancies have increased quite significantly since mid-2009, the unemployment rate has not declined significantly. This article analyzes the matching efficiency of jobs and workers in U.S. labor markets and its impact on the behavior of the unemployment rate and other labor market outcomes since the start of the latest recession.
Working Paper
Gross Migration, Housing and Urban Population Dynamics
Cities experience significant, near random walk productivity shocks, yet population is slow to adjust. In practise local population changes are dominated by variation in net migration, and we argue that understanding gross migration is essential to quantify how net migration may slow population adjustments. Housing is also a natural candidate for slowing population adjustments because it is difficult to move, costly to build quickly, and a large durable stock makes a city attractive to potential migrants. We quantify the influence of migration and housing on urban population dynamics using a ...