What is the optimal macroeconomic tariff when trade is imbalanced and the policy objectives go beyond social welfare and also include fiscal revenues, increasing the number of manufacturing jobs, and closing a trade deficit? We study these questions in an environment which allows for long-run...

We theoretically characterize the behavior of machine learning asset pricing models. We prove that expected out-of-sample model performance--in terms of SDF Sharpe ratio and test asset pricing errors--is improving in model parameterization (or "complexity"). Our empirical findings verify the...

We propose a statistical model of differences in beliefs in which heterogeneous investors are represented as different machine learning model specifications. Each investor forms return forecasts from their own specific model using data inputs that are available to all investors. We measure...

We survey the nascent literature on machine learning in the study of financial markets. We highlight the best examples of what this line of research has to offer and recommend promising directions for future research. This survey is designed for both financial economists interested in grasping...

By preemptive austerity, we mean a policy that increases taxes to deter potential rollover crises. The policy is so successful that the usual danger signal of a rollover crisis, a high yield on new bonds sold, does not show up because the policy eliminates the danger. Mechanically, high taxes...

We study the reasons for the large, coincident increases in unbalanced international trade and overall trade from 1970 to 2019. We show that these two salient features--a rise in net and gross international trade--are largely a consequence of a reduction in intratemporal trade barriers rather...

This paper is a case study of the exchange rate adjustments during the first week following the swapping US election results. We compute three measures of exchange rate depreciation: the maximum depreciation during the 1st trading day after November 6 UTC 0:00 to capture the reaction on the...

What are the long-run effects of permanent changes to the economy? We characterize long-run comparative statics for a broad class of models in terms of expenditure shares, substitution elasticities, and capital supply elasticities. Our key insight is that long-run analysis can be performed using...

This paper explores how non-U.S. central banks behave when firms in their economies engage in currency mismatch, borrowing more heavily in dollars than justified by their operating exposures. We begin by documenting that, in a panel of 53 countries, central bank holdings of dollar reserves are...

We propose a simple and flexible reduced-form econometric approach to estimate gravity models in the short and the long run. The theoretical lens for interpreting our methods amends the canonical Lucas-Prescott adjustment formulation to allow for time-interval-varying...