Working Papers

"Expected Wage Cuts and Job Search" 

Job Market Paper

Abstract:  In standard models, workers' expectations about their future real wages determine how much they search for new jobs. But using a panel survey, I show that predicted job search doubles for individuals who expect nominal-wage cuts—even after controlling for their expected real wages. I then develop a search-and-matching model with on-the-job search. The model's main feature is a dynamic game of search and wage setting between matched workers and firms. Adding behavioral worker preferences to the model reproduces the sharp increase in search when workers expect wage cuts, and this mechanism endogenously generates downward nominal wage rigidity. When I calibrate the model to match workers’ job-search response to expecting wage cuts, I find this behavior can explain 2/3 of observed wage freezes.

"The Great Inflation and Macroeconomic Data Releases" 

Abstract:  Existing research finds that initial releases of macroeconomic data (which are subject to revision) can significantly influence macroeconomic conditions, even if they are later corrected. However, I show observations from the Great Inflation drive these results, especially for inflation releases. During the Great Inflation, without any change in actual past inflation, announcing inflation was one percentage point higher last quarter led prices to rise two percent over the next year—but no such effect occurs outside of that time period. I show this can be theoretically explained by data releases causing purely self-fulfilling fluctuations, which can occur when monetary policy does not sufficiently respond to economic conditions in a model with information frictions. I then calibrate a quantitative model and find nearly all the price response to inflation releases can indeed be explained by this self-fulfilling mechanism, as opposed to standard effects resulting from imperfect information.

Publications

"The Term Structure of Monetary Policy Uncertainty" 

(with Brent Bundick and A. Lee Smith)

Journal of Economic Dynamics and Control, March 2024

Monetary policy announcements alter uncertainty surrounding the entire trajectory of future interest rates, and this helps explain the effects of forward guidance. 

Working paper version

"How Do FOMC Projections Affect Policy Uncertainty?" 

(with Brent Bundick)

Federal Reserve Bank of Kansas City, Economic Review 102(2), Second Quarter 2017

Measures of uncertainty fell after the FOMC began releasing its interest rate projections; however, uncertainty is significantly correlated with disagreement across participants’ projections.

Other
"Examining the Recent Shift in State and Local Pension Plans to Alternative Investments"

(with Huixin Bi)

Federal Reserve Bank of Kansas City, Macro Bulletin, September 27, 2017

State and local pension plans are increasingly turning to alternative investments, but underfunding only partially explains this shift. 

"Does the Recent Decline in Household Longer-Term Inflation Expectations Signal a Loss of Confidence in the FOMC?" 

(with Brent Bundick, Emily Pollard, and A. Lee Smith)

Federal Reserve Bank of Kansas City, Macro Bulletin, June 21, 2017

Households have lowered their longer-term inflation outlooks, but they appear confident in the FOMC’s ability to achieve stable prices. 

"How Does a Rise in International Shipping Costs Affect US Inflation?" 

(with Elizabeth M. Johnson, Nicholas Sly, and A. Lee Smith)

Federal Reserve Bank of Kansas City, Macro Bulletin, December 1, 2016

While international shipping costs are generally not included in import price indices, an increase in shipping costs still leads to a modest boost in core inflation after one year.