Department of Economics
77 Massachusetts Avenue
Cambridge, MA 02139
NBER Program Affiliations:
NBER Affiliation: Faculty Research Fellow
NBER Working Papers and Publications
|March 2017||Regional Heterogeneity and Monetary Policy|
with Andreas Fuster, Erik Hurst, Joseph Vavra: w23270
We argue that the time-varying regional distribution of housing equity influences the aggregate consequences of monetary policy through its effects on mortgage refinancing. Using detailed loan-level data, we show that regional differences in housing equity affect refinancing and spending responses to interest rate cuts but that these effects vary over time with changes in the regional distribution of house price growth. We then build a heterogeneous household model of refinancing with both mortgage borrowers and lenders and use it to explore the aggregate implications for monetary policy arising from our regional evidence. We find that the 2008 equity distribution made spending in depressed regions less responsive to interest rate cuts, thus dampening aggregate stimulus and increasing regi...
|February 2016||The Aggregate Implications of Regional Business Cycles|
with Erik Hurst, Juan Ospina: w21956
Making inferences about aggregate business cycles from regional variation alone is difficult because of economic channels and shocks that differ between regional and aggregate economies. However, we argue that regional business cycles contain valuable information that can help discipline models of aggregate fluctuations. We begin by documenting a strong relationship across US states between local employment and wage growth during the Great Recession. This relationship is much weaker in US aggregates. Then, we present a methodology that combines such regional and aggregate data in order to estimate a medium-scale New Keynesian DSGE model. We find that aggregate demand shocks were important drivers of aggregate employment during the Great Recession, but the wage stickiness necessary for them...