Research

Working Papers

• The Spender of Last Resort: Global Equilibrium Dynamics under the Zero Lower Bound (with Hanbaek Lee) [ link ]

Abstract:

This paper develops a framework for a fiscally-backed zero lower bound (ZLB) that supports a globally well-defined recursive competitive equilibrium. We show that a state-contingent fiscal rule neutralizes liquidity traps, enabling unified short- and long-run equilibrium analysis. The model endogenously generates a concave Phillips curve that flattens during ZLB episodes, matching empirical evidence. While this fiscal anchor stabilizes inflation, it transfers volatility to the real economy, causing unemployment volatility to surge. Finally, we document a policy substitution effect: fiscal multipliers diminish at the ZLB because discretionary stimulus largely crowds out the endogenous fiscal support required to maintain the equilibrium.

• Who Knows What the Fed Knows? Monetary Policy without Common Knowledge (with Kei Uzui) [ link ]

Abstract:

We study monetary policy when the central bank's information structure is not common knowledge. In our model, the central bank observes a market-based signal of beliefs, but the market is uncertain about whether the central bank observes this signal. Because markets infer the central bank's assessment of the economy from policy actions, this higher-order uncertainty distorts expectations and output relative to the common-knowledge benchmark. Our main result is that a conventional Taylor rule is generally insufficient to restore the common-knowledge allocation. To implement that allocation, policy must respond not only to the output gap, but also to the higher-order wedge created by the market's misspecification of the central bank's information set.

In Progress

• The Effects of Trend Inflation on Firm Uncertainty and Price Setting Behavior [ link ] 

• Attention Interaction between Firms and Households [ link ]