Research

Publications

Output gaps that are estimated in real time can differ substantially from those estimated after the fact. We provide a comprehensive comparison of real-time output gap estimates, with the aim of understanding this real-time instability. Using a statistical decomposition we find that including a Okun's law relationship improves real-time stability by alleviating the end-point problem. Models that include the unemployment rate also produce output gaps with relevant economic content. 

Online Appendix

Previously circulated as "Which Output Gap Estimates Are Stable in Real Time and Why?"

Heavy tails play an important role in modern macroeconomics and international economics.  Previous work often assumes a Pareto distribution for firm size, typically with a shape parameter approaching Zipf's law. This convenient approximation has dramatic consequences for the importance of large firms in the economy.  But we show that a lognormal distribution, or better yet, a convolution of a lognormal and a non-Zipf Pareto distribution, provides a better description of the U.S. economy, using confidential Census Bureau data. These findings hold even far in the upper tail and suggest heterogeneous firm models should more systematically explore deviations from Zipf's law.

Previously circulated as "On the U.S. Firm and Establishment Size Distributions".

Using weekly data on prices, costs and units sold by a supermarket chain, I estimate a discrete-choice dynamic model of a multi-product firm facing menu costs with a moment inequalities approach. This empirical methodology allows me to estimate two types of fixed costs of price adjustment: costs that are independent of the number of items that change prices and costs that are incurred at each item's price change. I find that both types of menu costs exist and are substantial.

I test the granular hypothesis, according to which the largest firms in the economy drive aggregate dynamics, by estimating a dynamic factor model with firm-level data and controlling for the propagation of firm-level shocks using a multi-firm growth model. The empirical results suggest that, once I control for aggregate shocks, idiosyncratic shocks do not explain much of U.S. GDP growth fluctuations.

We investigate a channel through which social capital may improve economic well-being and the functioning of institutions: political accountability. The main idea is that voters who share values and beliefs that foster cooperation are more likely to vote based on criteria of social welfare rather than narrow personal interest. We provide empirical evidence that electoral punishment in Italy is considerably larger in districts with higher social capital. 


Working Papers

Using data on U.S. manufacturing plants, I estimate a production function model that includes agglomeration intensity as a component of total factor productivity and allows agglomeration benefits to vary across establishments, which can lead to sorting. I find that agglomeration benefits decline with unobserved establishment-level raw productivity. 


We investigate the impact of branch closures on small businesses, whose credit access may be facilitated through local relationships with bankers. We use exogenous variation in branch closures related to mergers and acquisitions to show that closures of nearby branches decrease small business employment growth and entry. 

 

Other Publications

We compare parametric estimates of the establishment size distribution between the Synthetic Longitudinal Business Database (SynLBD) against our results (Kondo et al. 2020) using the confidential Longitudinal Business Database (LBD).

         We present a new database of historical Greenbook/Tealbook estimates of the output gap.

We develop a parsimonious bivariate model of inflation and unemployment that allows for persistent variation in trend inflation and in the non-accelerating inflation rate of unemployment. The model, which consists of five unobserved components including the trends) with stochastic volatility, implies a time-varying vector autoregression model for changes in the rates of inflation and unemployment.

In this paper we critically review the literature on the political economy of monetary policy, with an eye on the questions raised by the recent financial crisis.


Permanent Working Papers

Measures of consumption inequality are often derived from data on expenditures rather than consumption itself. We document that households systematically pay different prices for identical products, and that this price heterogeneity is closely related to household income: lower-income households pay lower prices than higher-income ones for the same product. Such heterogeneity might have a considerable impact on the measurement of consumption inequality: if poor households pay lower prices than rich households, existing measures of nominal consumption inequality may be biased upwards. However, we provide empirical evidence that price heterogeneity does not matter for the measurement of consumption inequality; in other words, we do not find evidence of a significant discrepancy between nominal and real inequality.