Department of Economics
University of Michigan
NBER Working Papers and Publications
|January 2018||Financial Heterogeneity and the Investment Channel of Monetary Policy|
with Thomas Winberry: w24221
We study the role of heterogeneity in firms' financial positions in determining the investment channel of monetary policy. Empirically, we show that firms with low leverage or high credit ratings are the most responsive to monetary policy shocks. We develop a heterogeneous firm New Keynesian model with default risk to interpret these facts and study their aggregate implications. In the model, firms with high default risk are less responsive to monetary shocks because their marginal cost of external finance is high. The aggregate effect of monetary policy therefore depends on the distribution of default risk across firms.
|November 2013||Jobless Recoveries During Financial Crises: Is Inflation the Way Out?|
with Guillermo Calvo, Fabrizio Coricelli: w19683
This paper discusses three policy tools to mitigate jobless recoveries during financial crises: inflation, real currency depreciation, and credit-recovery policies. Using a sample of financial crises in Emerging Market economies, we document that large inflationary spikes appear to help unemployment to get back to pre-crisis levels. However, the counterpart of inflation is sizably lower real wages. Hence, inflation does not prevent wage earners as a whole from getting hit by financial crises. Interestingly, neither the change in the real exchange rate nor the change in output composition (tradables/nontradables), from output peak to recovery point, displays a statistically significant relationship with inflation or jobless recovery. This suggests that currency depreciation can help redu...
|October 2012||Labor Market, Financial Crises and Inflation: Jobless and Wageless Recoveries|
with Guillermo A. Calvo, Fabrizio Coricelli: w18480
This paper uses a sample of 116 recession episodes in developed and emerging market economies to compare the labor-market recovery during financial crises with that of other recession episodes. It documents two new stylized facts. First, labor-market recovery from financial crises is characterized by either higher unemployment ("jobless recovery") or a lower real wage ("wageless recovery"). Second, inflation determines the type of recovery: low inflation (below 30 percent annual rate) is associated with jobless recovery, while high inflation is associated with wageless recovery. The paper shows that this pattern of labor recovery from financial crises is consistent with a simple model in which collateral requirements are higher (lower) when a larger share of labor costs (physical capital e...