Research

Working Papers

Endogenous Cognitive Discounting [Paper (Feb. '22 Version)] [Slides (Jan. '23 Version)]  (An updated draft of the paper will be available shortly. In the meantime, the slides contain a more recent version of the material.)

Presentations: University of Oxford (05.2021), 15th RGS Doctoral Conference (02.2022), 9th Annual Money and Macro Finance Society PhD Conference (04.2022), 10th Warwick Economics PhD Conference (06.2022), 2022 European Meeting of the Econometric Society (ESEM) (08.2022), 53rd Annual Conference of the Money and Macro Finance Society (09.2022), 1st Barcelona PhD Workshop on Expectations in Macroeconomics (10.2022) 

Awards: The oldest version of this paper was awarded the George Webb Medley Prize (2020) for best MPhil Economics thesis at the University of Oxford 

Abstract. Gabaix (2020) shows that cognitive discounting resolves a number of puzzles in the new Keynesian model and qualitatively alters the model’s policy implications. I analyze a model in which cognitive discounting is endogenous, so that the degree of forward-looking behaviour varies with the volatility and persistence of macroeconomic variables. I show that (i) the determinacy condition, (ii) optimal policy, and (iii) identification and estimation results change qualitatively compared to a model with exogenous discounting.

Heterogeneity in Imperfect Inflation Expectations: Theory and Evidence from a Novel Survey (with Alistair Macaulay) [Paper] [Presentation] 

Presentations: University of Oxford (03.2022), 35th SUERF Colloquium and 49th OeNB Economic Conference (05.2022), 4th Behavioral Macroeconomics Workshop (06.2022)

Abstract. Using novel survey data from Germany, we study heterogeneity in how households form inflation expectations. We elicit (i) uncertainty in perceptions of current inflation, and (ii) how persistent households perceive inflation to be. Combining these with standard survey questions on inflation, we infer laws of motion for expectations at the individual level. Based on averages alone, a standard model calibrated to our data predicts inflation shocks generate small and transitory responses in expectations and consumption. The considerable heterogeneity we observe in expectation formation, however, amplifies the transmission to aggregate consumption by an order of magnitude, and substantially increases its persistence.

Work in Progress

Heterogeneous Consumption Responses to Inflation: New Survey Evidence [Very Preliminary Slides]

A Four Equation New Keynesian Model with  Many Sectors and Non-Homothetic Preferences

Presentations: University of Oxford (12.2022)

I study a new Keynesian model with non-homothetic preferences over many final goods. For a broad class of preferences, I show that the textbook IS and Phillips curve hold, but for a differently weighted inflation index: the inflation rate of the marginal consumption basket. If one rewrites the model in terms of consumption-weighted inflation, it features a new variable: the relative price of the marginal consumption basket. I derive a law of motion for this relative price to give an analytically tractable four equation model. The first-order role of relative prices in this model (i) qualitatively changes optimal policy, (ii) biases the Phillips curve slope obtained when estimating the textbook model, and (iii) in a TANK extension, generates fluctuations in inequality.