Pierlauro Lopez

Research Economist -  Federal Reserve Bank of Cleveland

1455 E 6th St, Cleveland, OH 44114


Curriculum Vitae

Research interests

Macroeconomics; Asset Pricing; Computational Economics; Applied Econometrics.

Agenda: Discount-rate variation in production economies. Term structure modeling in dynamic equilibrium models. Macroeconomic relevance of bond and equity term structure data. Optimal policy in macro models with risk or financial frictions. Role of nominal rigidities in explaining asset prices. Computational methods in macro-finance equilibrium models.


Asset Prices and Unemployment Fluctuations (with Patrick J. Kehoe, Virgiliu Midrigan, and Elena Pastorino) [Link] [NBER Link], Review of Economic Studies, 2022.

Discount-rate variation can generate the observed fluctuations in unemployment in a standard matching model if workers accumulate human capital on the job as in the data. No need for sticky wages or other frictions in contracting. No need for a small fundamental surplus. Search models can therefore deliver on their original promise: to account for unemployment fluctuations with a story of involuntary unemployment and contracts in the agents' best interests.

On the Importance of Household Versus Firm Credit Frictions in the Great Recession (with Patrick J. Kehoe, Virgiliu Midrigan, and Elena Pastorino) [Link] [Data and Code], Review of Economic Dynamics, 2020.

A model supporting the view that the employment decline during the Great Recession would have been less severe if instead of focusing on easing firms’ access to credit, the government had devoted an equal amount of resources to alleviating households’ credit constraints.

A New Keynesian Q Theory and the Link between Inflation and the Stock Market [Link] [SSRN Link] [Online Appendix] [Data and Code], Review of Economic Dynamics, 2018.

The Q theory of investment changes if prices are sticky, and it links asset prices, investment and inflation better than you probably thought.

Working papers

World Financial Cycles (with Yan Bai, Patrick J. Kehoe, and Fabrizio Perri) [Link] [Slides]

Are asset prices in Emerging Markets driven by developments in Advanced Economies? A long-run risk model with defaultable, long-term corporate and sovereign debt to account separately for bond and stock price movements in the U.S. and emerging markets.

Presentations: UCSD 2022, AEA 2021, CMES 2021, U Penn (2022), SED 2023.

Nominal Rigidities and the Term Structures of Equity and Bond Returns (or Macro-Finance Separation by Force of Habit) (with David Lopez-Salido and Francisco Vazquez-Grande) [Link] [SSRN Link]

What are the macroeconomic drivers of asset prices? A downward-sloping term structure of equity and upward-sloping term structures of interest rates (i.e., hard-to-explain evidence) arise endogenously in a general-equilibrium model with nominal rigidities, productivity shocks and nonlinear habits in consumption. The model even captures the cyclicality of the term structures. We also show how to unite nonlinear habits and a production economy without compromising the ability of the model to fit macroeconomic variables.

Presentations: EFA 2015; SED 2015; Econometric Society 2015 World Congress; EEA 2015; Federal Reserve Board (2015); European Central Bank (2015); Banque de France (2015); Midwest Macro meetings 2016, 25th Rome MBF Conference (2016).

Welfare Implications of Asset Pricing Facts: Should Central Banks Fill Gaps or Remove Volatility? [Link] [SSRN Link] [Online Appendix]

Measures from asset markets about the welfare cost of fluctuations are the few pieces of evidence about welfare we have. Macroeconomists who study the benefits of stabilization policies should also use that evidence to test their models. I build a New Keynesian model with habit formation that explains the evidence about welfare costs of fluctuations, but that is observationally equivalent in its quantity implications to a textbook New Keynesian model. Observational equivalence requires habit externalities, which generate a policy tradeoff. The standard optimal stabilization policy turns on its head.

Presentations: FRB Cleveland (2019), EFA 2018, SED 2016, Deutsche Bundesbank (2016).

Accounting for Risk in a Linearized Solution (or Risk-Adjusted Linearizations of Dynamic Equilibrium Models) (with David Lopez-Salido and Francisco Vazquez-Grande) [Link] [SSRN Link] [Code (Matlab)] [Code (Julia), implemented by William Chen]

A linear approximation technique to solve for the equilibrium allocation and to price assets in closed form when we care about risk (e.g., Campbell-Cochrane habits, risk-sensitive preferences, stochastic volatility, disaster risk, ...). If you want to study time-varying risk premia and the effect of risk on the economy this approximation (aka a first-order perturbation around the risky steady state) is in many ways better than a third-order perturbation around the deterministic steady state.

Presentations: CEPR MMCN research conference 2017; EEA 2018; Econometric Society 2016 North American Summer meeting; EEA 2016; Society for Computational Economics meeting 2016; Society for Nonlinear Dynamics and Econometrics meeting 2017; Banque de France (2016); Federal Reserve Board (2017).

The Term Structure of the Welfare Cost of Uncertainty [Link]

The marginal welfare cost of economic uncertainty has a term structure that is a simple transformation of the term structures of the equity premium and interest rates. I extract 20 years of evidence from index option markets to infer a downward-sloping, volatile and countercyclical term structure of welfare costs.

Presentations: EFA 2014; Warsaw International Economic meeting 2013; ESRC European Workshop in Macroeconomics, London School of Economics (2013); 2013 meeting of Swiss Economists Abroad; 2012 Vigo Workshop on Dynamic Macroeconomics; Cantabria Campus Nobel workshop 2012; Federal Reserve Board (2013); Banque de France (2013); Swiss National Bank (2012); University of Lugano (2012).

Reassessing the Role of Stock Prices in the Conduct of Monetary Policy [Link]

On the fragility of some numerical procedures to solve for optimal Taylor-type rules.

Coming soon

Taxing the Rich (with V. V. Chari, Patrick J. Kehoe, Elena Pastorino, and Sergio Salgado)

Presentations: NBER-SI 2023, Ohio State U 2023.

Monetary Policy and Heterogeneous Agent Search (with Patrick J. Kehoe, Elena Pastorino, and Sergio Salgado)

Documents how the effects of monetary policy differ across people, especially in terms of labor market outcomes, builds a model to rationalize them, and illustrates the differential effects of different monetary policy rules.

Presentations: NASMES 2021, SED 2021.


"A theory of macroprudential policies in the presence of nominal rigidities", by Emmanuel Farhi and Ivan Werning, Banque de France-Toulouse School of Economics prize ceremony, February 2015. [Link]

"Financial intermediation and capital misallocation”, by Hengjie Ai, Kai Li and Fang Yang, EFA 2015, August 2015. [Link]

"Cross-border banking, macroprudential policy and monetary policy in a monetary union", by Matthieu Darracq-Pariès, Christoffer Kok and Elena Rancoita, 2017 ECB/MNB research conference. [Link]


My dissertation, Essays in Macro-Finance, September 2013. [Link]