Unconventional Monetary Policy and Policy Foresight, (with Andreas-Entony Violaris, Wayfair), Journal of Economic Dynamics and Control, Volume 164, July 2024, 104882. [Working Paper]
The Impact of Monetary Policy Shocks - Do not rule out Central Bank Information Effects or Economic News, (with Italo Santos Morais, Boise State), Economics Letters, Volume 237, April 2024, 111634. [Working Paper]
Government Spending between Active and Passive Monetary Policy: An Invariance Result, (with Collin Philipps, Air Force Academy), The B.E. Journal of Macroeconomics, vol. 24, no. 1, 2024, pp. 561-590. [Working Paper]
Does the Government Spending Multiplier depend on the Business Cycle? (with Collin Philipps, Air Force Academy), Journal of Money, Credit and Banking, Early Access. [Working Paper]
Government Spending and Heterogeneous Consumption Dynamics, Journal of Economic Dynamics and Control, Volume 114, May 2020, 103868. [Working Paper]
Abstract: The COVID-19 pandemic has created an unprecedented economic environment marked by extensive disruptions in global supply chains and soaring inflation rates. This paper studies the impact of these supply chain disruptions on consumer price inflation and examines how the effect varies across time and countries. Our results reveal that a global supply chain shock significantly raises consumer price inflation in the U.S., the Euro Area, the U.K., and Canada. These dynamic responses are consistently positive, even before the pandemic, and vary between 15 and 40 basis points in all four countries/areas depending on the state of the economy. Furthermore, global supply chain shocks are meaningful drivers of consumer price inflation, accounting for 10-20 percent of the variation in consumer price inflation over a two-year horizon.
Signaling Processing Monetary Policy Surprises -Policy, Information, and News in High-Frequency Data, with Italo Santos (Fairfield University)
Abstract: High-frequency identification has become the standard approach for identifying monetary policy shocks. Recently, however, this method has come under scrutiny, as several studies show that high-frequency instruments are contaminated by central bank information effects or by the Fed's-responds-to-news channel. Our paper develops a data-driven approach to address both sources of contamination simultaneously. First, we show that instruments from the literature that are orthogonalized to one form of contamination remain vulnerable to the other. Second, we implement a forward regression algorithm to estimate the optimal set of predictors for purifying measures of monetary policy shocks. The algorithm consistently chooses a mix of economic news and central bank information variables. While this confirms that both channels are present in high-frequency monetary policy data, additional analysis reveals that the Fed's-responds-to-news channel is considerably more robust. Third, using the selected predictors, we estimate distinct shock series for monetary policy, central bank information effects, and the Fed-responds-to-news channel, and study their effects in structural vector autoregression models. We find that monetary policy shocks reduce output and prices while tightening financial conditions. Fed-responds-to-news shocks, by contrast, raise output and prices and ease financial conditions. Finally, central bank information shocks increase output and prices, despite rising interest rates and excess bond premia.
Understanding Fiscal Policy Shocks: It’s in the Size as Well, with Xiaxiao Bai (Mississippi State) and Ken Rich (University of Mississippi)
Abstract: This paper investigates whether the macroeconomic effects of government spending depend on the size of the fiscal shock. Using U.S. quarterly data from 1947Q1 to 2015Q4, we estimate state-dependent effects of "large" versus "small" spending shocks via local projections. We find strong evidence of size-dependent fiscal multipliers. Large shocks generate an output multiplier near one by crowding in private consumption, whereas small shocks yield a significantly smaller multiplier. These results suggest an intervention's magnitude is critical to its effectiveness, providing empirical support for a "go big or go home" approach to fiscal stimulus.