We study how uncertainty shocks affect the macroeconomy across the inflation cycle using a nonlinear stochastic volatility-in-mean VAR. When inflation is high, uncertainty shocks raise inflation and depress real activity more sharply. A non-linear New Keynesian model with second-moment shocks...

Contrary to claims in studies on financial economics, a sparse database often obscures the identification of parameters in macroeconomic models. These identification problems originate from the poorly defined mapping between a structural model and reduced-form parameters. Hence, researchers rely...

This paper illustrates a behavioral mixed frequency macro-finance model where both real and financial variables are generated on a daily basis. Further, while financial sector data is collected at the same frequency as it is generated (i.e. daily), real data can only be collected on a quarterly...

We use an analytically tractable heterogeneous‐agent (HANK) version of the standard New Keynesian model to show how the size of fiscal multipliers depends on (i) the distribution of factor incomes, and (ii) the source of nominal rigidities. With sticky prices but flexible wages, the standard...

We introduce a novel simulated certainty equivalent approximation (SCEQ) method for solving dynamic stochastic problems. Our examples show that SCEQ can quickly solve high-dimensional finite- or infinite-horizon, stationary or non- stationary dynamic stochastic problems with hundreds of state...

This paper analyzes the unanalized topic in macroeconomic (monetary) politics, which is the emergence of the currency crisis as a consequence of targeting inflation. Many central banks adopted inflation targeting under a pressure from the IMF. Sudden depreciation of exchange rate which results...

Contrary to claims in studies on financial economics, a sparse database often obscures the identification of parameters in macroeconomic models. These identification problems originate from the poorly defined mapping between a structural model and reduced-form parameters. Hence, researchers rely...

We use an estimated medium-scale HANK model to investigate how the tradeoff between stabilizing inflation and consumption volatility varies for households with different levels of wealth. Consumption for the rich is mostly affected by demand shocks via their exposure to highly procyclical...

The natural interest rate is the real rate that would prevail in the long-run. The standard view in macroeconomics is that the natural rate depends exclusively on structural factors such as productivity growth and demographics. This paper challenges this view by discussing three alternative, and...

Purpose This study aims to elucidate the dynamics of monetary and fiscal policy interactions in Brazil, focusing on the impacts of positive shocks in government consumption and interest rates. By comparing rational and behavioral agent responses, it clarifies how these frameworks influence gross...

Most, if not all, of the studies in the existing literature that have examined the impacts of monetary policy implications on macroeconomic aggregates suffered from misleading impulse responses. To overcome the limitations in the existing literature and to fill the gap in the literature, this...

We study the optimal monetary policy problem in a New Keynesian economy with a zero lower bound (ZLB) on the nominal interest rate, when the steady state natural rate (r*) becomes permanently negative. We show that the optimal policy aims to approach gradually a new steady state with positive...

The recent surge in inflation led many unions and firms to alter their bargaining and wage-setting policies. Using novel German firm-level survey data, we document the extent of state dependence in wage setting across firms and workers during periods of high and low inflation. We find state...

This paper uses a Bayesian Structural Vector Autoregressive (BSVAR) framework to estimate the pass-through of unexpected gas price supply shocks on HICP inflation in the euro area and its four largest economies. In comparison to oil price shocks, gas price shocks have approximately one-third...

This paper studies how quantitative easing (QE) affects household welfare across the wealth distribution. I build a Heterogeneous Agent New Keynesian (HANK) model with household portfolio choice, wage and price rigidities, endogenous unemployment, frictional financial intermediation, an...