Hoover Institution and Economics Department
579 Serra mall
Palo Alto, CA 94305
Institutional Affiliations: Stanford University and the Federal Reserve Bank of Minneapolis
Information about this author at RePEc
NBER Working Papers and Publications
|June 2018||Evolution of Modern Business Cycle Models: Accounting for the Great Recession|
with Patrick J. Kehoe, Virgiliu Midrigan: w24741
Modern business cycle theory focuses on the study of dynamic stochastic general equilibrium models that generate aggregate fluctuations similar to those experienced by actual economies. We discuss how this theory has evolved from its roots in the early real business cycle models of the late 1970s through the turmoil of the Great Recession four decades later. We document the strikingly different pattern of comovements of macro aggregates during the Great Recession compared to other postwar recessions, especially the 1982 recession. We then show how two versions of the latest generation of real business cycle models can account, respectively, for the aggregate and the cross-regional fluctuations observed in the Great Recession in the United States.
Published: Patrick J. Kehoe & Virgiliu Midrigan & Elena Pastorino, 2018. "Evolution of Modern Business Cycle Models: Accounting for the Great Recession," Journal of Economic Perspectives, vol 32(3), pages 141-166. citation courtesy of
|March 2017||Financial Markets and Fiscal Unions|
with Patrick J. Kehoe: w23235
Do sophisticated international financial markets obviate the need for an active union-wide authority to orchestrate fiscal transfers between countries to provide adequate insurance against country-specific economic fluctuations? We argue that they do. Specifically, we show that in a benchmark economy with no international financial markets, an activist union-wide authority is necessary to achieve desirable outcomes. With sophisticated financial markets, however, such an authority is unnecessary if its only goal is to provide cross-country insurance. Since restricting the set of policy instruments available to member countries does not create a fiscal externality across them, this result holds in a wide variety of settings. Finally, we establish that an activist union-wide authority concern...
|September 2016||Debt Constraints and Employment|
with Patrick Kehoe, Virgiliu Midrigan: w22614
During the Great Recession, regions of the United States that experienced the largest declines in household debt also experienced the largest drops in consumption, employment, and wages. Employment declines were larger in the nontradable sector and for firms that were facing the worst credit conditions. Motivated by these findings, we develop a search and matching model with credit frictions that affect both consumers and firms. In the model, tighter debt constraints raise the cost of investing in new job vacancies and thus reduce worker job finding rates and employment. Two key features of our model, on-the-job human capital accumulation and consumer-side credit frictions, are critical to generating sizable drops in employment. On-the-job human capital accumulation makes the flows of bene...
Published: Patrick J. Kehoe & Virgiliu Midrigan & Elena Pastorino, 2019. "Debt Constraints and Employment," Journal of Political Economy, vol 127(4), pages 1926-1991.
|November 2015||Nonlinear Pricing in Village Economies|
with Orazio Attanasio: w21718
This paper analyzes and estimates the impact of quantity discounts for basic staples in rural Mexico. We propose a model of price discrimination that nests those of Maskin and Riley (1984) and Jullien (2000), in which consumers differ in their tastes and, due to subsistence constraints, in their ability to pay for a good. We show that, under mild conditions, a model in which consumers face heterogeneous subsistence or budget constraints is equivalent to one in which consumers have access to heterogeneous outside options. We then rely on known results (Jullien (2000)) to characterize the equilibrium price schedule. We analyze the effects of nonlinear pricing on market participation, as well as the impact of a market-wide income transfer on the price schedule, when consumers are differential...