Research
Working Papers
An Estimated DSGE Model of the Euro Area with Expectations about the Timing and Nature of Liftoff from the Lower Bound, The University of Sydney Working Paper Series – 2022 05 (Working Paper and the most recent version)
I investigate the implications of the zero lower bound (ZLB) in a structural New-Keynesian model for the euro area. The medium-scale DSGE model accommodates forward guidance by treating the expected durations of the ZLB constraint as free parameters in estimation. Incorporating professional forecasters’ expectations about the future path of the policy rate provides well-identified estimates of the durations. These estimates indicate that unconventional monetary policy becomes increasingly important from 2018 on. Furthermore, when monetary policy is expected to be passive in its response to inflation after liftoff, forward guidance has weaker effects with deflationary pressures on the economy. Finally, including data from the Covid-19 pandemic in estimation leads to stable estimates and allows an assessment of monetary policy during that period.
Work in Progress:
Indeterminacy and New Keynesian Puzzles: An Empirical Investigation (with Maria Eskelinen, Chris Gibbs, and Nigel McClung)
We estimate a medium-scale New Keynesian model with a zero lower bound (ZLB) constraint using novel techniques that accommodate determinacy and indeterminacy. Unlike the determinate model, which is susceptible to the usual New Keynesian puzzles of the ZLB, the indeterminate model admits equilibria with extraneous beliefs (”sunspots”) that reduce equilibrium responses to forward guidance announcements and resolve the New Keynesian puzzles. We find evidence that the US transitioned to this kind of indeterminate equilibrium after 2008, while the Euro Area data prefer a determinate model.
Time-Series Approach to Estimating a DSGE Model with Covid-19 Data (most recent version)
This paper proposes a time-series approach to handling extreme data outliers such as those observed during the Covid-19 pandemic when estimating a New-Keynesian Dynamic Stochastic General Equilibrium (DSGE) model for the euro area. Without changing the structural equations of a model, I make three adjustments to the estimation procedure: (1) A time-varying variance-covariance matrix to capture changes in shock variances; (2) a Kalman Filter measurement correction for consumption data; and (3) an ARMA(1,1) correction for TFP shock innovations. Estimation results are yielding robust estimates for the structural parameters of a standard DSGE model for the euro area. Importantly, as the Covid-19 pandemic coincided with a period when the zero lower bound on interest rates was in effect, this estimation technique provides valuable insights into the stance of monetary policy during the pandemic. It achieves this by constructing a structural shadow rate measure that unveils the impact of the unconventional policy actions taken during this time.
Other:
I was a Research Intern in the Economics Department at OECD in 2019. I contributed to macroeconomic topics, particularly on financial stability, for the Economic Survey for Germany 2020.
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