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Regional Government Consumption and Investment Multipliers (Job Market Paper)
This paper is the first to use the regional fiscal multipliers framework to separately identify government consumption and investment multipliers. I run panel IV regressions on a U.S. state-level dataset, constructed from transaction-level data on U.S. federal military procurement contracts, and find that regional government consumption multipliers are larger than regional government investment multipliers. Also, spillovers are more negative from government consumption. I interpret these results with a New Keynesian DSGE model of a two-sector, two-region monetary union, with two key mechanisms: (1) investment is more intertemporally substitutable, and (2) consumption exhibits greater home bias. Finally, I estimate a quantitative model of the United States as a 51-region monetary union, to measure the effects of the 2021 Infrastructure Investment and Jobs Act (IIJA). While panel estimates of regional multipliers are larger than time-series estimates of aggregate multipliers, the quantitative model yields larger aggregate multipliers than a model that abstracts from sectoral or regional differences.
JEL Codes: E32, E62, H30, H57.
Media Mentions: Chosun Biz (Korean, English), Aju News (Korean)
Market Rents and CPI Shelter Inflation (with Laurence Ball) (NBER Working Paper 31413) (NBER Digest, October 2025)
Recent research finds that the shelter component of CPI inflation responds with a lag to movements in market rents - the rents that tenants pay when they move into a new dwelling. This paper seeks to improve our understanding of this fact. We start by identifying three sources of lags between market rents and CPI shelter: the rents of most tenants are set in long-term leases; rents are smoothed for continuing tenants who renew leases; and CPI shelter inflation is measured with rent changes over six months. We incorporate these lags in a model of shelter inflation and compare the model to monthly data since 2015, using the Zillow Observed Rent Index to measure market rents. We find that the model performs fairly well, suggesting that it may be useful for understanding and forecasting inflation.
JEL Codes: E31, R21.
Media Mentions: Hankyung Newspaper (Korean)
Resolving the Fiscal Price Puzzle: General Equilibrium Effects and the Composition of Government Spending (with Sangyup Choi) (Yonsei Economics Research Institute Working Paper 2026RWP-280)
Does government spending raise prices? While standard models predict an inflationary effect, empirical findings are mixed—a puzzle known as the "fiscal price puzzle." We argue that this puzzle reflects differences in aggregation rather than a failure of standard demand transmission. Using newly constructed U.S. MSA-level federal procurement data from 1989–2023 and a shift-share IV strategy, we show that regional fiscal shocks raise local consumer prices when aggregate forces are absorbed through time fixed effects. When aggregate conditions are allowed to respond endogenously, however, the same shocks generate attenuated or even negative price responses. To interpret these findings, we develop a two-region New Keynesian model with centralized monetary policy. Local fiscal expansions increase regional prices but induce union-wide monetary responses that dampen aggregate inflation. Extending the model to consumption and investment sectors, we show that government consumption shocks raise regional and sectoral prices more than investment shocks, yet can produce smaller aggregate price effects due to stronger monetary feedback. Our results highlight how general equilibrium mechanisms and spending composition jointly shape fiscal inflation dynamics.
JEL Codes: E31, E52, E58, E62, F33.
Seeing the Economy with Colored Glasses: Partisanship in Macro and (not in) Micro Expectations (with Adrian Monninger and Tao Wang)
Political views affect households' macroeconomic expectations, but personal economic circumstances and self-interested motives remain the dominant factors shaping their beliefs. Using an expanded dataset covering 11 U.S. Presidential elections from 1980 to 2020, we show that households' personal finance expectations exhibit significantly less partisan bias than their macroeconomic expectations, as households are more directly informed about their own situations. By linking microeconomic beliefs to corresponding macroeconomic expectations, we differentiate between partisan bias, political sentiment, and differences in belief extrapolation. An empirically estimated factor model quantifies the time-varying importance of partisanship and microeconomic disparity in driving polarized views of the macroeconomy. Finally, we show that households "cheerlead" for policies to be beneficial to the broader economy often not because such policies are enacted by their favored winning party, but because they expect to personally gain from them.
JEL Codes: E21, E71.
I propose an estimation method, the panel Kalman filter, to estimate the slope of the regional Phillips curve (RPC) given unbalanced panel data of regional unemployment and inflation in a monetary union. I demonstrate, through Monte Carlo simulations, that estimates of the RPC slope through the panel Kalman filter are less biased and more consistent than estimates from fixed effects panel data methods. I compare these estimation methods on U.S. city-level data.
JEL Codes: C32, E30.
Works in Progress
Works in Progress
Tracing the Footprints of Macroeconomic Shocks: Evidence from Perceived Job Risks (with Tao Wang and William Du)
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