Publications​
​
​The impact of monetary policy shocks—Do not rule out central bank
information effects or economic news (Economic Letters 2024, with Sebastian Laumer)
This paper reassesses the impact of monetary policy and central bank information shocks while accounting for the influence of economic news. We regress a set of monetary policy surprises on a measure of economic news and incorporate these new instruments into an SVAR model. Furthermore, we distinguish between the two shocks via sign restrictions on the instruments’ impulse response functions. Our findings indicate significantly stronger and more enduring economic effects for monetary policy shocks, while the economic effects of central bank information shocks are weaker, if not vanish entirely. Nevertheless, persistent financial effects prevent us from completely dismissing the existence of central bank information effects. Consequently, it is important to account for both the effects of central bank information shocks and economic news in monetary policy settings.
Working Paper PDF REPLICATION FILES
​​​​
Working Papers
​
Towards Robust Local Projections
Presented At: The Econometric Society (European Winter Meeting), The Bank of Canada
Local projections (LPs) with external instruments have become a widely used approach for identifying structural impulse responses in empirical macroeconomics. However, when instruments are noisy or imperfect measures of structural shocks, the resulting estimates are subject to attenuation bias. This paper proposes a Bayesian two-stage local projection framework that remains robust to weak instruments. The method also recovers the posterior distribution of the bias term, allowing for a formal assessment of instrument exogeneity. I apply the approach to estimate the effects of U.S. marginal income tax shocks using medium-scale, annual-frequency data. The results indicate that while marginal tax shocks are contractionary, their negative effects on output and consumption dissipate within two years, likely due to capital–labor substitution effects. In a second application, I identify monetary policy shocks using high-frequency instruments and show that common instruments are substantially noisy—once this noise is accounted for, the estimated effects of monetary policy are significantly larger.
​
Signaling Processing Monetary Policy Surprises (with Sebastian Laumer)
Presented At: Triad Macro*, LAMC Monetary Group*, Midwestern Econometrics (Fall Meeting)*, William and Mary*, Southern Economics Association
High-frequency identification has become the standard approach for identifying monetary policy shocks. Recently, however, this method has come under scrutiny. Several studies show that high-frequency instruments are contaminated by central bank information effects or by the Fed-responds-to-news channel. Our paper develops a methodology to address both sources of contamination simultaneously. First, we show that instruments from the literature that are orthogonalized to one form of contamination remain vulnerable to the other. Second, we implement a forward regression algorithm to select the optimal set of predictors. The algorithm consistently chooses a mix of economic news and central bank information variables. This confirms that both channels are present in high-frequency monetary policy data. Third, using the selected predictors, we estimate distinct shock series for monetary policy, central bank information effects, and the Fed-responds-to-news channel, and study their effects in structural vector autoregression models. We find that monetary policy shocks reduce output and prices while tightening financial conditions. Fed-responds-to-news shocks, by contrast, raise output and prices and ease financial conditions. Finally, central bank information shocks increase output on impact, despite rising interest rates, spreads, and excess bond premia.
Working Paper PDF
​​
​
​
On The Empirics of Optimal Tax Policy Under Parameter Uncertainty.​
​
In this paper, I investigate optimal income tax policy when policymakers don’t know the elasticity of taxable income, the key structural parameters which is sufficient to determine optimal tax in a stylized model. In this setting, a question of how parameter uncertainty should be represented in the optimal tax policy arises. The standard practice is to derive optimal taxes as mappings of structural parameters and plug-in point and interval estimates in this mapping. I show the policy maker prior information is not fully incorporated in this case and propose an alternative — using welfare as a loss function when summarizing the posterior distribution of structural parameters. In a simulation exercise, I show the optimal policy interval estimates using the plug-in approach are wider than the ones using my proposed approach without any gain in coverage.
​
​
​
Other Working Projects​
The Asymmetric Effects of Business Cycle Shocks on R&D Investment (with Filippo Massari and Hedieh Shadmani)
Presented At: Southern Economic Association (Upcoming)*
Endogenous growth theory predicts that business cycle shocks that temporarily displace R&D from its trend have a permanent effect on productivity. If shocks and R&D responses are symmetric, the effects of negative and positive shocks cancel each other out over a sufficiently long period of time. Instead, the presence of any asymmetry introduces a link between business cycle shocks and the time average of productivity growth. We employ a Bayesian vector autoregression (VAR) with endogenous regime switching to detect whether the impulse response functions of R&D and total factor productivity (TFP) exhibit discontinuities based on the labor and credit market conditions. ​
​​
​
​
The Dynamic Impact of Social Security Spending: Evidence from Brazil.
​
This paper provides new evidence of the effects of government spending shocks on the Brazilian economy between 1990-2020. Identification of spending shocks is carried out in Bayesian VAR and LP and by using a new instrumental variable: statutory variation in public pension spending around the four social security reforms that have taken place in Brazil during the sampled period. Early results so far show spending shocks are pro-cyclical. The two year spending multiplier is between 0.7 and 1.8, large considering Brazil is an indebted developing economy. Multipliers are zero in the long run.
​
​​
​
​
​
​
* Presented by coauthor​​
​​​​​​