Household savings rose above trend in many developed countries after the onset of COVID-19. Given its link to aggregate consumption, the presence of these ``excess savings’’ has raised questions about their implications for the transmission of monetary policy. Using a panel of euro-area economies and high-frequency monetary policy shocks, we document that household excess savings dampen the effects of monetary policy on economic activity and inflation, especially during the pandemic period. To rationalize our empirical findings, we build a New Keynesian model in which households use savings to self-insure against counter-cyclical unemployment and consumption risk. 

I document business cycle properties of the cross-sectional distributions of U.S. stock returns and credit spreads. The skewness of returns of financial firms (SRF) best predicts economic activity, while being a barometer for the lending channel---credit supply shifts beyond what is explained by borrowers' conditions. SRF also predict firm-level investment beyond firms' balance sheets.  Using a structural model, I estimate that while SRF is highly cyclical, shocks to the cross-sectional skewness of financial firms’ asset quality help explain GDP growth in historical episodes. These results point to the cross-section of financial firms playing a prominent role in business cycles.
***Previously circulated as "Stock Market Cross-Sectional Skewness and Business Cycle Fluctuations" (2019) (Online Appendix) 

We provide a comprehensive account of the determinants of global longer-run neutral interest rates--–the real component of policy interest rates consistent with both economic activity and inflation at their longer-run trends. Using a cross-country model for 11 advanced economies in the 1960--2019 period, we \emph{simultaneously} account for productivity, demographics, global supply of safe assets, demand factors for safe assets, and global spillovers faced by each economy from the rest of the world's developments. We find two main results: safe asset supply is a major determinant of neutral rates, with its positive contribution since 2008 counteracting negative contributions from many other determinants, and global spillovers are important determinants of neutral rates' trajectories and  co-movements. 

Discussion about current and future neutral rates at Bank of Korea Annual Conference: here.

Older neutral rates estimates here. 

** Previously circulated as "Supply of Sovereign Safe Assets and Global Interest Rates"

This paper provides a comprehensive survey of existing measures of uncertainty, risk, and volatility, noting their conceptual distinctions. It summarizes how they are constructed, their relative advantages in usage, and their effects on financial market and economic outcomes. The measures are divided into four categories based on the construction methodology: news-based, survey-based, econometric-based, and market-based measures. While heightened uncertainty is typically associated with negative real and financial outcomes, the magnitude of these effects and the interpretation of transmission channels crucially depend on identification considerations.

We build a multi-country model for simultaneously nowcasting economic conditions in the euro area and its three largest member countries—Germany, France, and Italy. The model formalizes how market participants and policymakers monitor in real time both euro-area and country-specific market-moving indicators. The out-of-sample evaluation corroborates the usefulness of a multi-country approach to monitor the euro area. Indeed, the model provides accurate real-time predictions of economic conditions both on average and in the past three recessions, while finding that soft data are timely and intrinsically informative.

We study the effects of oil prices on consumption across countries and U.S. states, by exploiting the time-series and cross-sectional variation in oil dependency of these economies. We build two large data sets: one with 55 countries over the years 1975–2018, and another with all U.S. states over the period 1989–2018. We then show that oil price declines generate positive effects on consumption in oil-importing economies, while depressing consumption in oil-exporting economies. We also document that oil price increases do more harm than the good afforded by oil price decreases both in the world and in U.S. aggregates.

A large number of measures for monitoring risk and uncertainty surrounding macroeconomic and financial outcomes have been proposed in the literature, and these measures are frequently used by market participants, policy makers, and researchers in their analyses. However, risk and uncertainty measures differ across multiple dimensions, including the method of calculation, the underlying outcome (that is, the asset price or macroeconomic variable), and the horizon at which they are calculated. Therefore, in this paper, we review the literature on global risk, uncertainty, and volatility measures drawing on internal and external academic research as well as ongoing monitoring conducted by the Federal Reserve Board’s economics divisions to catalog measures by method of data collection, computation, and subject. We first explore a set of non-asset-market- based measures of risk and uncertainty, including news-based and survey-based uncertainty measures of monetary policy and macroeconomic outcomes. We then turn to asset-market-based measures of risk uncertainty for equity prices, interest rates, currencies, oil prices, and inflation. 

I empirically investigate the economic effects of uncertainty about the performance of financial firms. More specifically, I focus on the simple standard deviation of stock market returns across financial firms at every quarter, referring to this measure as financial volatility.  First, I show that the idiosyncratic risk highlighted by models with a financial accelerator channel is an important exogenous component of this measure.  Then, using a dynamic stochastic general equilibrium model and structural vector autoregressions, I show that exogenous movements in financial volatility cause substantial and persistent effects in credit, investment, and GDP; account for about 20% of the variation in these variables; and have played an important role during the last two credit crunches: the early 1990s recession and the Great Recession. Additionally, I show evidence of a feedback effect between credit spreads and financial volatility.