Working Papers
I study optimal macroprudential policy when its effects on investment and productivity are taken into account. To do so, I introduce a tractable way of modeling misallocation that generates a link between investment and productivity and can be easily taken to the data. Because macroprudential policies affect investment, they lead to productivity losses. I show that, when the policymaker is constrained in their available instruments, this generates a policy trade-off between financial stability and productivity growth. I derive a sufficient statistics formula for the second-best policy, including its productivity costs. I leverage the tractability of my model to get a range of estimates for the latter using rich firm-level microdata for several European countries. The trade-off is quantitatively relevant: For baseline crisis probabilities, productivity losses switch optimal policy from a capital control to a foreign borrowing subsidy.
The Macroeconomics of Wage Rigidity and Job Separations (April 2025), with Andres Blanco, Andres Drenik and Chris Moser
How does labor market heterogeneity affect the transmission of monetary policy? To answer this question, we develop a theory of non-Coasean labor markets with search frictions, idiosyncratic and aggregate shocks, sticky wages, and two-sided lack of commitment. We formulate the strategic interaction between workers and firms as a nonzero-sum stochastic differential game with stopping times and characterize its equilibrium. We show how to use microdata on wage changes and job transitions to identify the economy’s unobserved latent state, namely the distribution of wage-to-productivity ratios. Based on this distribution, we provide sufficient statistics for the aggregate response of employment and real wages to monetary shocks.
We use high-frequency asset price changes around Consumer Price Index announcements in the US to learn about market perceptions regarding the economy. First, we document three facts. An unexpected increase in the CPI inflation leads to an increase in (a) treasury nominal yields (b) forward breakeven inflation rates. The response of the stock price and the future annual dividends of S&P 500 companies varies over the years. We interpret these facts through the lens of a New Keynesian Model with an inflation announcement to decompose unexpected inflation into demand and supply components. We find that the share of supply in unexpected inflation has increased by 20 percentage points post-covid.
Publications
Central Bank Credibility and Fiscal Responsibility (September 2024), with Jesse Schreger and Pierre Yared.
American Economic Review: Insights
We consider a New Keynesian model with strategic monetary and fiscal interactions. The fiscal authority maximizes social welfare. Monetary policy is delegated to a central bank with an anti-inflation bias that suffers from a lack of commitment. The impact of central bank hawkishness on debt issuance is non-monotonic because increased hawkishness reduces the benefit from fiscal stimulus while simultaneously increasing real debt capacity. Starting from high levels of hawkishness (dovishness), a marginal increase in the central bank’s anti-inflation bias decreases (increases) debt issuance.
Forthcoming, American Economic Journal: Macroeconomics
We study the distribution of labor income during large devaluations. Across countries, inequality falls after large devaluations within the context of a surge in inflation and a fall and subsequent recovery of real labor income. To better understand inequality dynamics, we use a novel administrative dataset covering the 2002 Argentinean devaluation. We show that following a homogeneous fall in real labor income across workers, the bottom of the income distribution recovers faster than the top. Low labor mobility and lack of union coverage among high-income workers explain their slow recovery.