Research

Working papers:

House price expectations and inflation expectations: evidence from survey data, with Ricardo Nunes and Roshni Tara 

We find that households tend to overweight house price expectations when forming their inflation expectations. The finding is robust across several specifications and two survey data sets for the United States. We also find that there is a significant effect of the cognitive abilities of households as more sophisticated households don't overweight house price inflation as much. We model this household behaviour in a two-sector New Keynesian model with an overweighted and a non-overweighted sector and analytically derive a welfare loss function consistent with the micro-foundations of the model. In this setup, we show that to gauge the correct interest rate response, the central bank needs to be aware that some sectors are overweighted and that movements in expected inflation in such sectors are important for monetary policy.

The perils of the Dual Mandate,  with Cristiano Cantore 

We study the implications of a ‘dual mandate’ of price and output stability in a heterogeneous agent New Keynesian economy where fiscal policy is set in nominal terms. Specifically, we explore the scenario where the government controls the quantity of nominal debt, enabling price level determination independent of the interest rate trajectory, as highlighted by Hagedorn (2021). Our analysis reveals that when the central bank pursues a dual mandate, local price level determinacy is compromised, and the economy may not converge to a stable equilibrium if the central bank aims to stabilize inflation and economic activity. This instability is attributed to the dynamics of government spending. In contrast, if the central bank stabilizes only inflation, real government spending acts as an automatic stabilizer. We demonstrate that targeting the price level can restore determinacy, positing that central banks with dual mandates may benefit from adopting a Wicksellian-type rule. 

Government spending and consumption inequality,  with Francesco Fusari and Roshni Tara

Inflation expectations shock and household behaviour,  with Francesco Fusari and Roshni Tara

Work in progress:

Accounting for long-term macro-finance trends, with Martin Arazi and Gabor Pinter