Research Interests
My research interests are primarily in macroeconomics, monetary economics, and applied time series (macroeconometrics). I am particularly interested in studying the interaction between monetary and fiscal policy, financial markets, and the real economy.
Refereed Publications
Interest Rates, Money, and Fed Monetary Policy in a Markov-Switching Bayesian VAR
[Paper] [Supplement Appendix] [Additional Results Appendix]
The B.E. Journal of Macroeconomics, Volume 23, Issue 2, June 2023, pp. 959-997
Abstract: This paper evaluates the roles of short- and long-term private and government interest rates and inside and outside money in the monetary transmission mechanism. With money and credit markets present, changes in monetary policy set off a chain of relative price and portfolio adjustments affecting output and prices. I study interest rate and money supply rules within this monetary transmission mechanism by estimating several Markov-switching Bayesian vector autoregressions (MS-BVARs) on a quarterly U.S. sample from 1960 to 2018. The best-fit MS-BVAR restricts MS to the impact and lag coefficients of the monetary policy and money demand regressions as well as to the stochastic volatilities (SVs) of the structural shocks. Estimates of this MS-BVAR yield evidence of a SV regime which coincides with NBER-dated recessions. This MS-BVAR also identifies a regime switch in the Fed’s interest rate rule and banks’ demand for outside money around the dot com bust of 2000 and again from the 2007–2009 recession and financial crisis to the end of the sample. Counterfactual simulations show the 2007–2009 recession and financial crisis would have not been as deep and long-lasting if the fed funds rate had been as low as −8 % in 2009 and remained negative from 2010 through 2016.
Working Papers
Measuring the Effects of Fiscal Policy Shocks on U.S. Output in a Markov-Switching Bayesian VAR
Job market paper (New Draft: 11/5/2023)
[Paper] [Supplement Appendix][Conference Slides]
Abstract: Fiscal foresight—the phenomenon by which households, workers, firms, and investors preemptively react to anticipated future policy changes—limits conventional structural VARs’ ability to reliably assess the impact of fiscal policy on the real economy. This paper addresses this issue by measuring the effects of government spending and tax shocks on U.S. output in a Markov-switching Bayesian VAR (MS-BVAR). The MSBVAR accounts for foresight by explicitly capturing agents’ expectations about future fiscal regime changes. Three key findings emerge. First, the size of the spending multiplier varies across different states of the U.S. business and financial cycle. During expansions, spending multipliers are approximately one but increase to 1.4 to 1.8 during recessions. Second, this paper finds no compelling evidence for an unambiguously large tax multiplier. Contrary to previous empirical estimates ranging from -2 to -3, the tax multiplier estimates fall between -0.1 to -0.4 and are swamped with uncertainty. This finding aligns more closely with results obtained by fiscal DSGE models. Third, given the estimated spending multipliers are larger in magnitude than the tax multipliers, this paper lends empirical support to the traditional Keynesian notion that U.S. output responds more to spending shocks than to tax shocks.
Work in Progress
“Asymmetric Effects of Divisia Monetary Aggregate Shocks” (with Joshua Hendrickson)
“Money, Liquidity, and U.S. Monetary-Fiscal Policy Interactions”
“Monetary and Fiscal Policy in a Low Interest Rate World”