PUBLICATIONS
“News About Taxes and Expectations-Driven Business Cycles,” Macroeconomic Dynamics, Vol. 23 (4), June 2019, 1340-1370.
Abstract: This paper analyzes the possibility of expectations-driven business cycles to emerge in a one-sector real business cycle model if the unique driving force is news about future income tax rates. We fi nd that good news about labor income tax rates cannot generate expectations-driven business cycles, while good news about capital income tax rates can. We show that a one-sector real business cycle model enriched with (i) variable capital utilization and (ii) investment adjustment costs and driven solely by news shocks about capital income tax rates is able to generate qualitatively and quantitatively realistic business cycle fluctuations. In contrast to numerous studies in the news-driven business cycle literature, our model maintains separable preferences.
“News About Aggregate Demand and the Business Cycle”, with Jang-Ting Guo and Mark Weder, Journal of Monetary Economics, Vol. 72, May 2015, 83-96.
Abstract: We show that an otherwise standard one-sector real business cycle model with variable capital utilization and mild increasing returns-to-scale is able to generate qualitatively as well as quantitatively realistic aggregate fluctuations driven by news shocks to two formulations of future consumption demand or government spending on goods and services. In sharp contrast to many studies in the existing expectations-driven business cycle literature, this result does not rely on non-separable preferences or investment adjustment costs. When the economy is subject to anticipated total factor productivity or investment-specific technology shocks, the relative strength of the intertemporal substitution effect needs to be enhanced for our model to exhibit positive macroeconomic co-movement and business cycle statistics that are consistent with the data.
“On Expectations-Driven Business Cycles in Economies with Production Externalities: A Comment”, with Jang- Ting Guo and Richard M.H. Suen, International Journal of Economic Theory, Vol. 8, No 3, September 2012, 313-319.
Abstract: Eusepi (2009, International Journal of Economic Theory 5, pp. 9-23) analytically finds that a one-sector real business cycle model may exhibit positive co-movement between consumption and investment when the equilibrium wage-hours locus is positively-sloped and steeper than the households labor supply curve. However, we show that this condition does not imply expectations-driven business cycles will emerge in Eusepi's model. Specifically, a positive news shock about future productivity improvement leads to an aggregate recession whereby output, employment, consumption and investment all fall in the announcement period.
WORKING PAPERS
“Changes in the Old-Age Dependency Ratio and Growth: A Decomposition of the Human Capital and Physical Capital Effects,” with Patrick Emerson and Shawn Knabb (under review)
Abstract: How does the old age dependency ratio influence the rate of economic growth? To address this question, we explore two main channels: human capital accumulation and physical capital accumulation. We begin by developing a stylized endogenous growth model that identifies these two separate channels. It is shown that the old age dependency ratio at the beginning of a growth period identifies the human capital accumulation channel and the old age dependency ratio at the end of a growth period identifies the physical capital accumulation channel. After providing our identification strategy, we use OECD data from 1975 to 2014 to estimate each effect. First, the data indicate that an aging population reduces spending on children, which reduces human capital accumulation and slows growth. Second, the data indicate that households are not saving enough to generate growth through capital deepening prior to retirement. Our framework also suggests this observed drag on growth is the result of government policy in response to population aging. In other words, it is government policy that is reducing human capital accumulation and physical capital accumulation as the population ages.
"An Algorithm for Identifying Potentially Influential Subsets when using Regression Analysis in Finance," with Shawn Knabb (under review)
Abstract: This paper proposes a regression diagnostic tool capable of identifying influential subsets in the data. The idea is to create an ordered sequence of observations, where the ordering is based on the influence each observation has on the coefficient estimate for a specific variable of interest. The first subset of entries in the ordered sequence lists observations with the greatest negative contribution to the full sample parameter estimate. The last subset of entries in the ordered sequence lists observations with the greatest positive contribution to the full sample estimate. To determine if the coefficient estimate is disproportionately affected by a small subset of data, we sequentially remove observations from each end of the ordered sequence. We provide two examples to highlight the usefulness of this procedure. We also provide a number of extensions for the procedure beyond Ordinary Least Squares.