Fiscal Policy and the Monetary Transmission Mechanism

Accepted at Review of Economic Dynamics
We study the role of fiscal policy in the monetary transmission mechanism. When monetary policy has fiscal consequences, monetary variables affect the timing of aggregate output, while fiscal variables determine its present value and the wealth effect.

Bond Premium Cyclicality and Liquidity Traps

Accepted at Review of Economic Studies
Best Paper Award at the
The nature of safety traps and their policy implications are determined by the cyclicality of the bond premium. In the data, we find evidence that favors self-fulfilling liquidity traps. We propose robust policies that prevent the existence of self-fulfilling traps and are expansionary in fundamental traps.

Working Papers

Monetary Policy and Government Debt

Revise and Resubmit at Journal of Money, Credit and Banking
We present a model where wealth effects generated by government bonds weaken the transmission of changes in the policy rate to output. In the U.S., when government debt is one standard deviation above its mean, the response of industrial production and unemployment to an expansionary monetary shock is reduced by 0.5pp and 0.075pp, respectively, out to a three-year horizon.

Sowing the Seeds of Financial Crises: Endogenous Asset Creation and Adverse Selection (new draft)

Revise and Resubmit at Review of Economic Studies
What sows the seeds of financial crises and what policies can help avoid them? I model the interaction between the ex-ante production of assets and ex-post adverse selection in financial markets.

Liquidity and Investment in General Equilibrium

We study the implications of trading frictions in financial markets for firms’ investment and dividend choices and their aggregate consequences. When equity shares trade in frictional asset markets, the firm’s problem is time-inconsistent, and it is as if it faces quasi-hyperbolic discounting. Our findings rationalize several empirical regularities on liquidity and investment.

Monetary Policy and Wealth Effects: The Role of Risk and Heterogeneity

Analytical heterogeneous-agents model with: i) rare disasters and ii) positive private debt. Model captures time-varying risk premia and precautionary savings in a linearized setting. Wealth effects induced by time-varying risk and private debt account for the bulk of the output response to monetary policy.