Repatriation Taxes (Joint with Chadwick C. Curtis and M. Saif Mehkari): We present a model of a multinational firm to quantify the effects of changes in repatriation taxes — taxes that firms pay on profits remitted from abroad. Expectations of lower future repatriation tax rates induce firms to accumulate assets abroad. A subsequent lowering of the repatriation tax rate causes a large transfer of assets from abroad, but a significant portion of these assets are those that were accumulated in anticipation of the policy change. By altering the relative price of holding assets abroad, news of a future reduction in repatriation tax rates acts as an implicit tax on repatriating funds today. We capture and quantify this wedge, which we refer to as a “shadow tax.”
Are Supply Shocks Contractionary at the ZLB? Evidence from Utilization-Adjusted TFP Data | NBER WP (Joint with Rob Lester and Eric Sims): In contrast to the predictions of the basic NK model, positive productivity shocks are estimated to be relatively more expansionary at the ZLB.
The Review of Economics and Statistics, Forthcoming.
The Relative Importance of Aggregate and Sectoral Shocks and the Changing Nature of Economic Fluctuations (Joint with Michael Pries and Eric Sims): An island model capturing the empirical finding that sectoral shocks became relatively more important in the mid-eighties, is consistent with several changes observed in business cycle moments, including the decline in the cyclicality of labor productivity.
American Economic Journal: Macroeconomics, Forthcoming.
Raise Rates to Raise Inflation? Neo-Fisherianism in the New Keynesian Model | NBER WP (With Rob Lester and Eric Sims): Driven by the forward-looking nature of the model, increasing the inflation target in a New Keynesian model may require increasing the nominal interest rate in the short run.
Journal of Money, Credit and Banking, Forthcoming.
The Opportunity Cost(s) of Employment and Search Intensity (With Rob Lester): Recent evidence suggests flow utility is procyclical. Procyclical job search implies effective unemployment benefits (EUB) are countercyclical. Omitting endogenous search upwardly bias measured correlation between EUB and productivity.
Macroeconomic Dynamics, Forthcoming.
Inflation and the Evolution of Firm-Level Liquid Assets (Joint with Chadwick C. Curtis and M. Saif Mehkari): Liquid assets as a share of total assets for US corporations steadily declined from the 1960s to the early 1980s, and has since steadily increased; we show that inflation has played a major role.
Journal of Banking and Finance, Vol 81, August 2017, 24–35.
On the Desirability of Nominal GDP Targeting | NBER WP (With Rob Lester and Eric Sims): NGDP targeting is associated with smaller welfare losses than Taylor rule and inflation targeting; it may outperform output gap targeting if gap is observed with noise, and has more desirable properties related to equilibrium determinacy.
Journal of Economic Dynamics and Control, Vol 69, August 2016, 21–44.
Optimal Monetary Policy and Imperfect Financial Markets: A Case for Negative Nominal Interest Rates? (With Salem Abo-Zaid): A standard New-Keynesian model with money demand and financial frictions gives rise to negative optimal nominal rates; the tighter credit conditions, the more likely it is to be negative.
Economic Inquiry, Vol 54, Issue 1, January 2016, 215–228.
Borrowing Constraints, Collateral Fluctuations, and the Labor Market: Financial constraints introduce a wedge in the job-creation equation so that the relative bargaining position of firms is influenced by credit conditions. Fluctuations in collateral requirements generate significant movements in labor market variables.
Journal of Economic Dynamics and Control, Vol 57, August 2015, 112–130.
Residential Mortgage and Nonrecourse Debt: Default Decision in a Dynamic Framework (New version coming soon): I develop a life-cycle model to study the effects of nonrecourse mortgages on the default decision of homeowners. In the model, the tenure decision is endogenously determined and, every period, householders decide whether to default on their mortgage in the presence of uncertainty in both income and house prices. By incorporating a riskless asset, I study the extent to which the recourse allowed to lenders can affect default rates. I find that while the size of the down payment has a noticeable impact in the default decision of homeowners in a recourse environment, the punishment that follows default does not.