Job Market Paper
"Heterogeneity of consumption responses to aggregate uncertainty"
Using monthly data from a large panel of US households from 2004-2019, we show that the consumption response to aggregate uncertainty depends fundamentally on the source of uncertainty and its cross-sectional incidence. The average impact of macroeconomic uncertainty is driven by the lower tail of the response distribution, while uncertainty in nominal and monetary factors, rather than real activity, is mostly responsible for its short-run effects. In contrast, financial uncertainty affects a broader share of households and generates larger and more persistent consumption declines than macroeconomic uncertainty. To interpret these findings, we use a semi-structural decomposition that distinguishes between households' sensitivity of the marginal propensity to consume to household-level uncertainty and the persistence of their exposure to aggregate uncertainty. We infer these components by matching the structural impulse responses to those estimated by local projections.
Working Papers
"The Cross Section of Household Preferences: MPCs and the HtM Status" (with Andreas Tryphonides and Elena Andreou)
Using a long panel of household consumption data and a partial identification approach, we set-identify household-level preferences in the United States while allowing for arbitrary financial constraints and measurement error. We examine two policy-relevant questions: the direct effect of preferences on the marginal propensity to consume (MPC) and the indirect effect through hand-to-mouth (HtM) status. Matching preferences to reported MPCs from the 2008 Tax Rebate, we provide direct empirical evidence that preferences affect the MPC on the margin, consistent with theoretical predictions. We identify HtM households over time and show that preferences are informative about this status, with transition rates varying over the business cycle and across preference types. The discount factor exhibits the strongest effects.
"The effect of Macroeconomic Uncertainty on key economic indicators in Cyprus" (with Elena Andreou)
The study estimates two complementary measures of macroeconomic uncertainty, based on econometric models, to capture domestic and foreign uncertainty and their effect on a small open economy, Cyprus. We estimate uncertainty from (i) a large panel of economic indicators in Cyprus, referred to as domestic uncertainty, and (ii) a large panel of international/foreign economic variables which are correlated with the domestic (Cyprus) economic variables, referred to as foreign uncertainty. The impact of the macro uncertainty measures on GDP, employment, and bank loans are evaluated in the context of a Vector AutoRegressive (VAR) model. Domestic and foreign uncertainty shocks have significant effects on real economic activity; however, the magnitude and persistence of these effects differ based on the source of the uncertainty. Interestingly, while domestic uncertainty shocks result in a reduction in bank loans, fluctuations in foreign uncertainty increase loan activity.