Working Papers

Hysteresis, Inflation Dynamics, and the Changing Phillips Correlation, December 2023.

 In theoretical models of hysteresis, inflation is less sensitive to fluctuations in economic activity as the productive capacity of the economy responds endogenously to shocks. This prediction is validated empirically using a structural VAR model. The rise in the importance of hysteresis effects is responsible for most of the apparent flattening of the Phillips curve.

Estimating Hysteresis Effects, with Francesco Furlanetto, Ørjan Robstad, Juan Rubio-Ramírez and Pål Ulvedal (Norges Bank and Emory University), June 2021. Accepted in the American Economic Journal: Macroeconomics. 

We extend the Blanchard-Quah decomposition by identifying both demand and supply shocks with long-run effects on output. Demand shocks with permanent effects on output, or "hysteresis" shocks, are important drivers of output in the U.S. over the period 1983-2019 and are concentrated in recessions.

Publications

The Limited Power of Monetary Policy in a Pandemic, with Cristina Fuentes-Albero (Fed Board),  2022,  European Economic Review.

We embed a canonical epidemiology model in a New Keynesian model and analyze the role of monetary policy as a virus spreads and triggers a sizable recession. We find that: 1) consumption is less sensitive to real interest rate changes in a pandemic than in normal times as individuals balance the benefits of taking advantage of intertemporal substitution opportunities with the risk of becoming sick; 2) the optimal design of monetary policy hinges on how other tools used to limit virus spread are deployed - the more sub-optimal (looser) lockdown policies are, the tighter monetary policy should be.

• Code available in the Epidemic-Macro Model database developed by Mathias Trabandt and Volker Wieland. 

The optimal rate of inflation with discount factor heterogeneity, 2022,  Journal of Money, Credit and Banking.

Adding an overlapping generations structure to the canonical New Keynesian model can generate an optimal inflation rate that is significantly positive.  This result arises because the rate at which firms discount future profit flows naturally differs from the rate at which the planner discounts future utility flows.

Asymmetric unemployment fluctuations and monetary policy trade-offs, 2020, Review of Economic Dynamics.

A significant trade-off between inflation and unemployment stabilization arises in a New Keynesian model with search and matching frictions in the labor market when two conditions are met: 1) steady-state distortions are large; 2) the fundamental surplus is small. Wage rigidity is neither a necessary nor a sufficient condition.

Labor supply factors and economic fluctuations, with Claudia Foroni (ECB) and Francesco Furlanetto (Norges Bank). 2018, International Economic Review.

A new VAR identification scheme to disentangle demand and technology shocks from several labor market shocks, including wage bargaining, labor supply, and matching efficiency shocks.

Reduced form wage equations in the credible bargaining model, joint with Vincent Boitier (Université du Mans). 2018, Labour Economics.

A simple and transparent wage equation can be derived in the credible bargaining model of Hall and Milgrom (2008) when a plausible parameter restriction is imposed.

Non-refereed publication

The FR-BDF Model and an Assessment of Monetary Policy Transmission in France, with M. Lemoine, H. Turunen, M. Chahad , A. Zhutova, P. Aldama, and J.P. Laffargue, October 2019.

A semi-structural large scale macroeconometric model of the French economy that shares some similarities with FRB/US, its U.S. counterpart. It is the main model used for forecasting and scenario analysis at Banque de France.