Department of Economics
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Evanston, IL 60208
NBER Program Affiliations:
NBER Affiliation: Faculty Research Fellow
NBER Working Papers and Publications
|September 2018||The Intertemporal Keynesian Cross|
with Adrien Auclert, Ludwig Straub: w25020
We demonstrate the importance of intertemporal marginal propensities to consume (iMPCs) in disciplining general equilibrium models with heterogeneous agents and nominal rigidities. In a benchmark case, the dynamic response of output to a change in the path of government spending or taxes is given by an equation involving iMPCs, which we call the intertemporal Keynesian cross. Fiscal multipliers depend only on the interaction between iMPCs and public deficits. We provide empirical estimates of iMPCs and argue that they are inconsistent with representative-agent, two-agent and one-asset heterogeneous-agent models, but can be matched by models with two assets. Quantitatively, models that match empirical iMPCs predict deficit-financed fiscal multipliers that are larger than one, even if moneta...
|April 2018||Comment on "Accounting for Factorless Income"|
in NBER Macroeconomics Annual 2018, volume 33, Martin Eichenbaum and Jonathan A. Parker, editors
|February 2018||Inequality and Aggregate Demand|
with Adrien Auclert: w24280
We explore the transmission mechanism of income inequality to output. In the short run, higher inequality reduces output because marginal propensities to consume are negatively correlated with incomes, but this effect is quantitatively small in the data and in our model. In the long run, the output effects of income inequality are small if inequality is caused by rising dispersion in individual fixed effects, but can be large if it is the manifestation of higher individual income risk. We formalize the connection between partial and general equilibrium effects, and show that the two are closely related under standard assumptions about the behavior of monetary policy. Our economy features a depressed long-run real interest rate, allowing us to quantify the potential contribution of income i...
|October 2014||Investment Hangover and the Great Recession|
with Andrei Shleifer, Alp Simsek: w20569
We present a model of investment hangover motivated by the Great Recession. In our model, overbuilding of residential capital requires a reallocation of productive resources to nonresidential sectors, which is facilitated by a reduction in the real interest rate. If the fall in the interest rate is limited by the zero lower bound and nominal rigidities, then the economy enters a liquidity trap with limited reallocation and low output. The drop in output reduces nonresidential investment through a mechanism similar to the acceleration principle of investment. The burst in nonresidential investment is followed by an even greater boom due to low interest rates during the liquidity trap. The boom in nonresidential investment induces a partial and asymmetric recovery in which the residential se...
Published: Matthew Rognlie & Andrei Shleifer & Alp Simsek, 2018. "Investment Hangover and the Great Recession," American Economic Journal: Macroeconomics, vol 10(2), pages 113-153. citation courtesy of