Time-Varying Market Sensitivity to Macro News and Monetary Policy: the Role of Attention (Job Market Paper) [Draft by Oct 2025] [Working paper version to be released after institutional review]
Presentations: AFA Poster, Midwest Macro Meetings, South Cal International Macro Finance conference, UC Irvine, HKMA/HKIMR, AEA lightening
Abstract: Market sensitivity to macroeconomic announcements (e.g., payrolls, CPI) varies substantially over time. Focusing on interest rate responses, I document that sensitivity increases during periods of high inflation, rising unemployment, and when the Federal Reserve emphasizes macroeconomic conditions. To uncover the fundamental driver, I distinguish between two hypotheses—changes in investor attention and variations in the perceived data dependence of the monetary policy rule—using an empirical strategy based on their differing implications for the transmission of monetary policy. Consistent with the attention hypothesis, I find that the impact of FOMC announcements is amplified in periods when market sensitivity to macroeconomic announcements is high. A standard New Keynesian model with cognitive discounting is used to illustrate the differences between the two mechanisms. Overall, this paper highlights the role of attention in the effectiveness of monetary policy and macro dynamics.
Beyond Energy: Inflationary Effects of Metals Price Shocks in Production Networks (with Jorge Miranda-Pinto, Andrea Pescatori, and Martin Stuermer) [Draft by May 2025]
IMF World Economic Outlook Oct 2024; IMF Working Paper; VoxEU
Abstract: We examine the role of metals as economic inputs by constructing a small-open-economy production network model, calibrated for various countries using domestic input-output (I-O) tables and sectoral imports data. Empirically, we employ local projections to test the implications from the model on how metal shocks influence inflation. Our findings indicate that metals price shocks have significant and persistent effects on core and headline inflation, with particularly pronounced effects on countries that are highly exposed to metals in their production networks. This is in contrast to oil supply shocks, which predominantly affect headline inflation. Hence, metal price shocks are less visible on impact but more persistent, which central banks should consider when assessing inflation dynamics and risks.
Inflation Inattention and the Efficacy of Monetary Policy
Abstract: This paper provides a new empirical measure of household inflation inattention, documents inattention cycles, and explores how the level of household inattention affects the transmission of monetary policy in the U.S. Employing an interacted VAR framework, I show that the transmission of monetary policy varies systematically with the degree of household inattention, partly driven by the endogenous adjustment of attention to economic conditions. Counterfactual analysis confirms that this channel is quantitatively important--holding attention fixed after shocks substantially reduces the observed state dependence in policy transmission.
Climate Awareness, Financial Frictions, and Transition Risk
Abstract: I extend an Environmental DSGE model to study climate transition risks in the presence of financial frictions that depend on banks’ portfolio composition--“green” versus “brown” assets.
"Commodity Prices and Global Economic Activity" (with Akito Matsumoto and Andrea Pescatori) Japan and the World Economy. Volume 66, June 2023, 101177
IMF World Economic Outlook April 2019