Felipe Schwartzman

I am a senior economist at the Richmond Fed. Most of my research focuses on identifying the causes of business cycle, or detailing transmission mechanisms, with an eye to heterogeneity.

I am also currently the chair of the economics section of the International Society for Inventory Research and in the editorial board for the BE Journal of Macroeconomics and for the Brazilian Economics Review (Revista Brasileira de Economia).



Academic Work

(with Christian Matthes, March 2019)

We use economic theory to rank the impact of structural shocks across sectors. This ranking helps us to identify the origins of U.S. business cycles. To do this, we introduce a Hierarchical Vector Auto-Regressive model, encompassing aggregate and sectoral variables. We find that shocks whose impact originate in the “demand” side (monetary, household and government consumption) account for 43 percent more of the variance of U.S. GDP growth at business cycle frequencies than identified shocks originating in the “supply” side (technology and energy). Furthermore, corporate financial shocks, which theory suggests propagate to large extent through demand channels, account for an amount of the variance equal to an additional 82 percent of the fraction explained by these supply shocks.

FRB-Richmond Working Paper 19-07 (with Saroj Bhattarai and Choongryul Yang, March 2019)

We show that the housing wealth collapse of 2006-09 had a persistent impact on employment across counties in the U.S. In particular, localities that had a larger loss in housing net worth during that period had more depressed employment as late as 2016, without a commensurate population response. The use of IV's and controls to identify the causal impact of the wealth shock amplifies those results, leading to an estimate that a 10 percent change in housing net worth between 2006 and 2009 causes a 4.5 percent decline in local employment by 2016, as compared with a 2006 baseline. We do not find a long-term causal impact of the shock on wages. Sectoral results indicate, however, that the results are unlikely to be purely a result of persistently low demand, since, contrary to the short-run effects, the effect over the longer horizon is less concentrated in the non-tradables sectors and is instead more prominent in the high-skilled services sector.


(with Scott Fulford) accepted at Review of Economics and Statistics. FRB-Richmond Working Paper Version. - Download Online Appendix - Download Replication Files. Formerly "The Benefits of Commitment to a Currency Peg: The Gold Standard, National Banks and the 1896 U.S. Presidential Election"

We develop a method to use the one-time cross-sectional impact of a cleanly identified shock to identify its aggregate impact through the use of a factor model. We apply this methodology to evaluate the importance of commitment to a currency peg for macroeconomic outcomes during the gold standard period in the U.S. The presidential election in 1896 provides a cleanly identified positive shock to commitment to the gold standard. After the election, national-bank leverage increased substantially, particularly in states where gold was in greater use. Using the latent factor identified by the election, we find that full commitment to gold had the potential to reduce the volatility of real activity overall by a significant amount in the last two decades of the 19th century, as well as substantially mitigate the economic depression starting in 1893.

(with Kartik Athreya and Andrew Owens) Quantitative Economics (November 2017), 8: 761–808. FRB-Richmond Working Paper Version. See related coverage in Richmond Fed's Economic Brief, with Jessie Romero.

The aftermath of the recent recession has seen calls to use transfers to poorer households as a means to enhance aggregate economic activity. The goal of this paper is to study the effects of wealth redistribution from rich to poor households on consumption and output in the short run. We first demonstrate analytically how the direction and size of the output effects of such interventions depend on labor supply decisions. We then show that in a standard incomplete‐markets model extended to allow for nominal rigidities and parametrized to match the U.S. wealth distribution, wealth redistribution does lead to a temporary boom in consumption but a far smaller increase in output. Our results suggest substantial value in empirical research uncovering the distribution of marginal propensities to work in the population.

(with Carlos Carvalho). Journal of Monetary Economics (November 2015): 141-156. FRB-Richmond Working Paper Version- Download Technical Appendix. - Download Mathematica Files.

For a given frequency of price adjustment, monetary non-neutrality is smaller if older prices are disproportionately more likely to change. Selection for the age of prices provides a complete characterization of price-setting frictions in time-dependent models. Selection for older prices is weaker and non-neutralities are larger if the hazard function of price adjustment is less strongly increasing. Selection is weaker if there is heterogeneity in price stickiness. Finally, selection is weaker if durations of price spells are more variable. In particular, the Taylor (1979) model exhibits maximal selection for older prices, whereas the Calvo (1983) model exhibits no selection.

(with Pierre-Daniel Sarte and Thomas Lubik). Journal of Monetary Economics (November 2015): 264-283. FRB-Richmond Working Paper Version Download Supplementary Material. See related coverage in Richmond Fed's Economic Brief, with Karl Rhodes.

Beginning in the mid-1980s, U.S. business cycles changed in important ways, notably via distinctive shifts in the comovement and relative volatilities of labor productivity, hours, output, and inventories. Inventories provide additional information relative to aggregate investment regarding firms׳ intertemporal decisions, and thus additional insight in explaining business cycles. We show that variations in the discount factor estimated using inventories, which may be interpreted as fluctuations in a generalized investment wedge, play a key role in explaining the shifts in U.S. business cycles observed after the mid-1980s. Moreover, these variations correlate well with independent measures of credit market frictions.

Journal of Monetary Economics 68 (November 2014): 37-52. Ungated final version. FRB-Richmond Working Paper Version

After emerging market crises, value added falls more in manufacturing industries that normally exhibit higher inventory/cost ratios. Moreover, the difference in value added between manufacturing industries with different inventory/cost ratios persists years into the recovery. A shock to aggregate TFP cannot by itself match this pattern. In contrast, a persistent increase in the cost of foreign capital can. In the context of a calibrated multisector small open economy model, a shock to the cost of foreign capital consistent with the cross-industry data leads, 3–5 years after the onset of the crisis, to an average reduction of output relative to a trend of 5.4 percent.


(with Marianna Kudlyack, Revised June 2012) Richmond Fed Working Paper 12-04

We conduct an accounting exercise of the role of worker flows between unemployment, employment, and labor force nonparticipation in the dynamics of the aggregate unemployment rate across four recent recessions: 1982-1983, 1990-1991, 2001, and 2007-2009 (the "Great Recession"). We show that, whereas during earlier recessions it was sufficient to examine the flows between employment and unemployment to account for the dynamics of the unemployment rate, this was not true in the Great Recession. The increased importance of the flows between nonparticipation and unemployment is documented across all age and gender groups.

(with Carlos Carvalho). Revised 2008 (key results subsumed into "Selection and Monetary Non-Neutrality in Time-Dependent Pricing Models")

Federal Reserve Bank Publications (Economic Quarterly)

Publications in Portuguese

Estimativa de Curva de Phillips com Preços Desagregados Economia Aplicada v. 10, n.1 (jun-mar 2006), 137-145

Trabalho Infantil no Brasil (with Simon Schwartzman, 2004), International Labor Organization