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 ** Job Market Paper **
Presented At: Bank of Canada, The Econometric Society (European Winter Meeting)
Local projections (LPs) with external instruments have gained prominence as a method for identifying structural impulse responses in empirical macroeconomics. However, when instruments are imperfect measures of structural shocks, estimates are prone to attenuation bias. This paper introduces a Bayesian two-stage local projection method that is robust to weak instruments. The proposed approach also samples the posterior distribution of the bias term, enabling an evaluation of the exogeneity of the instruments. I apply this method to estimate the impulse responses to U.S. marginal income tax shocks using a medium-sized, annual-frequency local projection. The results show that while marginal tax shocks are contractionary, their effects on real activity and consumption dissipate within two years, likely due to capital-labor displacement effects. Furthermore, I identify the effects of monetary policy shocks using high-frequency instruments, demonstrating that commonly used instruments are noisy and that accounting for this noise reveals larger estimated effects of monetary policy.
Signal Processing Monetary Policy Surprises (with Sebastian Laumer)
Monetary policy surprises defined as the variation in financial variables around FOMC meetings is a common source of identification for monetary policy shocks in empirical macroeconomics. It’s well known such measures are contaminated by central bank information effects, high-frequency fluctuation in financial markets, economic news and more. In this paper, we seek to fully characterize this excess noise by searching for optimal predictors of monetary policy surprises in teal-book variables and measures of economic news. We find that even after controlling for new releases, revisions in unemployment forecasts and the CPI releases still drive monetary policy surprises.​​​​​​​
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 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.
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​