Krisztina Molnar

"Price stability" in central bank mandate

Publications

"On the perils of stabilizing prices when agents are Learning”,

with Antonio Mele (LSE) and Sergio Santoro (Banca d'Italia), forthcoming Journal of Monetary Economics

Euler Equations, Subjective Expectations and Income Shocks

with Orazio Attanasio (Yale) , and Agnes Kovacs (U.Manchaster) Economica; page 1 - 36; 2019

Using survey data of Inflation expectations in the estimation of learning and rational expectations models

with Arturo Ormeño (U: AMsterdam, now Credit Suisse) , Journal of Money, Credit and Banking Volume 47 (4); page 673 - 699; 2015

Optimal monetary policy when agents are learning

with Sergio Santoro (Banca d'Italia), European Economic Review Volume 66; page 39 - 62; 2014

Discussion paper

Handbook of Monetary Economics, Chapter "Inflation Expectations, Adaptive Learning and Optimal Monetary Policy" Vitor Gaspar, Frank Smets, and David Vestin

Thanks for all who are teaching it, see Woodford syllabus

Learning with expert advice

Journal of the European Economic Association Volume 5 (2-3); page 420 - 432; 2007

Learning agents CAN survive competition with full information fully rational agents.

Encyclopedia of the Sciences of Learning, 2012 Edition, Editors: Norbert M. Seel

Policy work

Norges Bank Watch 2008, joint with Knut Roed (University Oslo) and Steinar Juel (Nordea Bank, 2019 Civita, Norges Bank board)

The committee evaluated if the objectives stated in the monetary policy mandate concur with those expressed by Norges Bank and whether Norges Bank uses it policyinstruments efficiently in order to achieve the relevant objectives. As a result of the report Norges Bank started publishing summarised adjusted forecasts after eachmonetary policy meeting, paid more attention to be more systematic in its usage of policy phrases, and also started considering policy implications of non-rational agents in its main model. Statistics Norway also followed the recommendation of our report and the 2007 report and improved wage and labor market statistics.

``Transmission Mechanism of Monetary Policy in Central and Eastern Europe'', joint with Georgy Ganev (Sofia University St. Kliment Ohridski), Krzysztof Rybinski (BPH PBK SA ) and Przemyslaw Wozniak (CASE Foundation), CASE Reports No.52, 2002

I guess I was too young, have not sent it for publication. It has 144 google scholar citations by now.

Work in progress

``Identifying Preference Shocks: Earthquakes, Impatience and Household Saving'', joint with Karlygash Kuralbayeva (King's College London), Concetta Rondinelli (Banca d'Italia), and Po Yin Wong (Hong Kong Monetary Authority) [First draft]

The trauma of experiencing a natural disaster can have a devastating impact on individuals, even if they are not economically devastated. We exploit the panel structure of a nationally representative survey in Italy to explore plausible mechanisms linking traumatic experience to individual attitudes towards time. Combining the household survey with city level impact data of the 2009 L'Aquila Earthquake, we identify households who felt the shake but had no substantial changes in their economic circumstances. We elicit their patience using a survey measure about their willingness to pay for the immediate realization of a future payment. Our difference-in-differences estimates show that affected individuals become more impatient compared to similar individuals who did not feel the shake. Consistent with this finding, the same households increase consumption and decrease their savings. We also show that temporary trauma can have a lasting impact. People save less from disposable income for several years after the earthquake.

``Economic Stability and the Responsiveness of Inflation Expectations'', joint with Zoltan Reppa [Draft- ongoing data updating]

This paper studies the relationship between history of economic stability and expectation formation. Our approach is to combine cross-country data on survey-based inflation expectations with a standard specification for expectation formation. Our central finding is that in unstable countries, expectations are more sensitive to recent data and discount the past more. This pattern in surveys is rational in the sense that it concurs with both theory and practice of good forecasting. Weighting in surveys is in line with theoretical predictions of optimal forecasting in unstable environments. We also show that it provides good out of sample forecasts in practice. Our result suggests that temporary bad policies can have persistent costs: may persistently increase volatility by making expectations more responsive to current shocks.

``Screening Experts: an Example for a First-Best Contract'' ,joint with Balazs Szentes (LSE) [Draft]

We consider the problem of an investor who has to hire an expert to manage his investments. The per period return to investment depends on how well the expert predicts the value of the realization of an autocorrelated stochastic process. Experts differ in their initial knowledge regarding this process. In addition, an expert with better knowledge has a higher outside option. A contract of the investor specifies the wage of the expert as a function of total profit. The goal of the investor is to design a contract which maximizes his payoff. The difficulty of designing a contract can be explained as follows. On the one hand, a better expert has to receive higher wage for otherwise he prefers not to participate. On the other hand, the optimal contract has to guarantee that a worse expert does not pretend to be a better one. We show that in certain environments, the investor can achieve the same profit, by designing optimal contracts, as if the type of the expert was observable.

``Income inequality and the Hungarian flat tax reform'', joint with Floris Zoutman (Norwegian School of Economics) and Tamas Briglevics (National Bank of Hungary) [Just starting - data cleaning phase]

NORFACE application with NHH, ENS Lyon, HEC Lausanne (2nd round)

We analyze redistributive effects and labor market effects of the 2012 Hungarian flat tax reform, using a new administrative data from the Hungarian Pension Payment Directorate (PPD). This reform was large scale (the new tax was cut below the lowest progressive tax) and simple, which makes frictions like adjustment costs, or inattentiveness, to be less likely to distort optimal choices (Chetty, 2012). Also, a technical advantage of a flat-tax reform is that the tax rate after the reform is fixed and therefore exogenous to household behavior (see Kopczuk 2012). The data is currently in the cleaning phase.

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