Research Papers

Workers, Capitalists, and the Government: Fiscal Policy and Income (Re)Distribution, with C. Cantore (October 2020)
Accepted at Journal of Monetary Economics

Abstract. We propose a novel two-agent New Keynesian model to study the interaction of fiscal policy and household heterogeneity in a tractable environment. Workers can save in bonds subject to portfolio adjustment costs; firm ownership is concentrated among capitalists who do not supply labor. The model is consistent with micro data on empirical intertemporal marginal propensities to consume, and it avoids implausible profit income effects on labor supply. Relative to the traditional two-agent model, these features imply, respectively, a lower sensitivity of consumption to the composition of public financing; and smaller fiscal multipliers alongside pronounced redistributive effects.

Volatile Hiring: Uncertainty in Search and Matching Models, with P. Rendahl and W. den Haan (substantially revised version, December 2020)
Resubmitted to Journal of Monetary Economics

Abstract. In search-and-matching models, the nonlinear nature of search frictions increases average unemployment rates during periods with higher volatility. These frictions are not, however, by themselves sufficient to raise unemployment following an increase in perceived uncertainty; though they may do so in conjunction with the common assumption of wages being determined by Nash bargaining. Importantly, option-value considerations play no role in the standard model with free entry. In contrast, when the mass of entrepreneurs is finite and there is heterogeneity in firm-specific productivity, a rise in perceived uncertainty robustlyincreases the option value of waiting and reduces job creation.
Abstract. This paper studies the role of uncertainty in a search-and-matching framework with risk-averse households. Heightened uncertainty about future productivity reduces current economic activity even in the absence of nominal rigidities, although the effect is reinforced by the latter. The reason is that a more uncertain future increases households’ precautionary behavior, causing demand to contract. At the same time, future asset prices become more volatile and covary positively with aggregate consumption, which increases the risk premium, puts negative pressure on asset values, and contracts supply. Compared to negative demand shocks, uncertainty shocks are less deflationary and render a flatter Phillips curve.

Work in Progress

Job Market Paper

  • ...should hopefully appear here sometime in 2022 ;)


Discussions

"Household Portfolio Choices and Nonlinear Income Risk," by J. Galvez