Pub Date : 2024-11-01DOI: 10.1016/j.jmoneco.2024.103612
We study a general equilibrium model of the labor market in which agents slowly learn about their suitability for jobs. Our model reproduces desirable features of the data, many of which standard models fail to replicate. We explore how, in such an environment, asymmetric information can lead to substantial misallocation. We calibrate our model to US data and quantify the welfare loss arising from misallocation due to informational frictions. The tractability of the model allows us to explore the responsiveness of wages and employment to an aggregate shock. We find that wage rigidity arises endogenously because of protracted learning, and in line with the data, the model is able to generate a larger and more persistent employment response.
{"title":"Learning about labor markets","authors":"","doi":"10.1016/j.jmoneco.2024.103612","DOIUrl":"10.1016/j.jmoneco.2024.103612","url":null,"abstract":"<div><div>We study a general equilibrium model of the labor market in which agents slowly learn about their suitability for jobs. Our model reproduces desirable features of the data, many of which standard models fail to replicate. We explore how, in such an environment, asymmetric information can lead to substantial misallocation. We calibrate our model to US data and quantify the welfare loss arising from misallocation due to informational frictions. The tractability of the model allows us to explore the responsiveness of wages and employment to an aggregate shock. We find that wage rigidity arises endogenously because of protracted learning, and in line with the data, the model is able to generate a larger and more persistent employment response.</div></div>","PeriodicalId":48407,"journal":{"name":"Journal of Monetary Economics","volume":"148 ","pages":"Article 103612"},"PeriodicalIF":4.3,"publicationDate":"2024-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141142509","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-11-01DOI: 10.1016/j.jmoneco.2024.103618
This paper studies the effect of monetary policy on inflation along the income distribution in the euro area and shows that monetary policy has differential effects. In response to monetary tightenings, high-income households engage in more intense product substitution and trade down in the product and store space relative to low-income households, such that their inflation responds relatively more. This channel stands in contrast to the effect arising from different consumption bundles, which imply that the inflation experienced by high-income households responds less to monetary policy. The paper also reveals substantial cross-country heterogeneity, with the product substitution channel being more pronounced in countries where price differences between possible substitutes are larger.
{"title":"Shopping behavior and the effect of monetary policy on inflation heterogeneity along the income distribution","authors":"","doi":"10.1016/j.jmoneco.2024.103618","DOIUrl":"10.1016/j.jmoneco.2024.103618","url":null,"abstract":"<div><div><span><span><span>This paper studies the effect of monetary policy on </span>inflation along the income distribution in the euro area and shows that monetary policy has differential effects. In response to monetary tightenings, high-income households engage in more intense </span>product substitution and trade down in the product and store space relative to low-income households, such that their inflation responds relatively </span><em>more</em>. This channel stands in contrast to the effect arising from different consumption bundles, which imply that the inflation experienced by high-income households responds <em>less</em> to monetary policy. The paper also reveals substantial cross-country heterogeneity, with the product substitution channel being more pronounced in countries where price differences between possible substitutes are larger.</div></div>","PeriodicalId":48407,"journal":{"name":"Journal of Monetary Economics","volume":"148 ","pages":"Article 103618"},"PeriodicalIF":4.3,"publicationDate":"2024-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141501116","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-11-01DOI: 10.1016/j.jmoneco.2024.103631
N. Gregory Mankiw
This essay discusses six of my beliefs about the inflation process that are not universally shared among economists.
本文讨论了我对通货膨胀过程的六种看法，这些看法并没有得到经济学家的普遍认同。
{"title":"Six beliefs I have about inflation: Remarks prepared for NBER conference on “Inflation in the Covid era and beyond”","authors":"N. Gregory Mankiw","doi":"10.1016/j.jmoneco.2024.103631","DOIUrl":"10.1016/j.jmoneco.2024.103631","url":null,"abstract":"<div><div>This essay discusses six of my beliefs about the inflation process that are not universally shared among economists.</div></div>","PeriodicalId":48407,"journal":{"name":"Journal of Monetary Economics","volume":"148 ","pages":"Article 103631"},"PeriodicalIF":4.3,"publicationDate":"2024-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141781811","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-11-01DOI: 10.1016/j.jmoneco.2024.103654
Christina D. Romer, David H. Romer
Why are some attempts at disinflation successful and others failures? We investigate this question in the context of the Federal Reserve's attempts at disinflation since World War II. Our central finding is that a fundamental determinant of success was the strength of the Federal Reserve's commitment to disinflation at the start of its attempts. In episodes where its commitment was high, there were significant declines in inflation that were often long-lasting, while in ones where its commitment was low, falls in inflation were small and short-lived. We find that although the extent of the Federal Reserve's commitment was often clear to the public, there is no evidence that stronger commitment to disinflation directly affected expected inflation. Rather, the main channel through which weak commitment led to unsuccessful disinflation was premature abandonment of the disinflationary policy. We conclude by discussing the implications for the Federal Reserve's current effort at disinflation.
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Pub Date : 2024-11-01DOI: 10.1016/j.jmoneco.2024.103619
We use credit bureau data to show that credit card limits grow rapidly early in life and are an important early-life liquidity source. Yet individual credit utilization is stable over the short and long term. To explain these new findings, we propose a life-cycle consumption model with heterogeneous preferences, the option to revolve, and credit cards used for payments. Using diary data to identify payment use and the revealed preference that some people with credit cards borrow at high interest, while others do not to help identify heterogeneous preferences, the estimated model matches consumption and credit use at every frequency. The model suggests that around half the population has an endogenously high marginal propensity to consume. This targetable population explains the large consumption response to unexpected cash.
{"title":"Credit cards, credit utilization, and consumption","authors":"","doi":"10.1016/j.jmoneco.2024.103619","DOIUrl":"10.1016/j.jmoneco.2024.103619","url":null,"abstract":"<div><div>We use credit bureau data to show that credit card limits grow rapidly early in life and are an important early-life liquidity source. Yet individual credit utilization is stable over the short and long term. To explain these new findings, we propose a life-cycle consumption model with heterogeneous preferences, the option to revolve, and credit cards used for payments. Using diary data to identify payment use and the revealed preference that some people with credit cards borrow at high interest, while others do not to help identify heterogeneous preferences, the estimated model matches consumption and credit use at every frequency. The model suggests that around half the population has an endogenously high marginal propensity to consume. This targetable population explains the large consumption response to unexpected cash.</div></div>","PeriodicalId":48407,"journal":{"name":"Journal of Monetary Economics","volume":"148 ","pages":"Article 103619"},"PeriodicalIF":4.3,"publicationDate":"2024-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141587531","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-11-01DOI: 10.1016/j.jmoneco.2024.103615
I develop a heterogeneous agents overlapping generations model to assess the welfare effects of substituting the US income security system with a UBI policy. I study two counterfactual exercises: an expenditure-neutral reform and a large, policy-oriented UBI reform with a transfer equivalent to $1000 monthly, both financed by changes in the consumption tax. The first exercise has a moderate fiscal impact, induces increases in the aggregate output and employment, and reduces earnings and wealth inequality. The second exercise requires a large increase in the consumption tax rate, decreases employment and output, and increases earnings inequality, which moves sideways for wealth. In both cases, disposable income and consumption are more equally distributed, with less accrual at the top. The two economies generate positive welfare gains, with those for the generous UBI economy being larger.
我建立了一个异质代理人世代重叠模型，以评估用全民医保政策取代美国收入保障制度的福利效应。我研究了两个反事实案例：一个是支出中性的改革，另一个是以政策为导向的大规模 UBI 改革，每月转移支付相当于 1000 美元，两者都由消费税的变化提供资金。第一种改革对财政的影响不大，能增加总产出和就业，减少收入和财富的不平等。第二种做法需要大幅提高消费税率，减少就业和产出，加剧收入不平等，财富不平等则呈横向发展。在这两种情况下，可支配收入和消费的分配更加平等，顶层累积的收入减少。这两种经济都产生了正的福利收益，而慷慨的 UBI 经济的福利收益更大。
{"title":"The macroeconomic effects of universal basic income programs","authors":"","doi":"10.1016/j.jmoneco.2024.103615","DOIUrl":"10.1016/j.jmoneco.2024.103615","url":null,"abstract":"<div><div>I develop a heterogeneous agents overlapping generations model to assess the welfare effects of substituting the US income security system with a UBI policy. I study two counterfactual exercises: an expenditure-neutral reform and a large, policy-oriented UBI reform with a transfer equivalent to $1000 monthly, both financed by changes in the consumption tax<span><span>. The first exercise has a moderate fiscal impact, induces increases in the aggregate output and employment, and reduces earnings and wealth inequality. The second exercise requires a large increase in the </span>consumption tax<span> rate, decreases employment and output, and increases earnings inequality, which moves sideways for wealth. In both cases, disposable income and consumption are more equally distributed, with less accrual at the top. The two economies generate positive welfare gains, with those for the generous UBI economy being larger.</span></span></div></div>","PeriodicalId":48407,"journal":{"name":"Journal of Monetary Economics","volume":"148 ","pages":"Article 103615"},"PeriodicalIF":4.3,"publicationDate":"2024-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141501117","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-11-01DOI: 10.1016/j.jmoneco.2024.103660
Régis Barnichon, Adam Hale Shapiro
The Phillips curve plays a central role in the macroeconomics literature. However, there is little consensus on the forcing variable that drives inflation in the model, i.e., on the appropriate measure of “slack” in the economy. In this work, we systematically assess the ability of variables commonly used in the literature to (i) predict and (ii) explain inflation fluctuations over time and across U.S. metropolitan areas. In particular, we exploit a newly constructed panel dataset with job openings and vacancy filling cost proxies covering 1982–2022. We find that the vacancy-unemployment (V/U) ratio and vacancy filling cost proxies outperform other slack measures, in particular the unemployment rate. Beveridge curve shifts—notably, movements in matching efficiency—are responsible for the superior performance of the V/U ratio over unemployment.
{"title":"Phillips meets Beveridge","authors":"Régis Barnichon, Adam Hale Shapiro","doi":"10.1016/j.jmoneco.2024.103660","DOIUrl":"10.1016/j.jmoneco.2024.103660","url":null,"abstract":"<div><div>The Phillips curve plays a central role in the macroeconomics literature. However, there is little consensus on the forcing variable that drives inflation in the model, i.e., on the appropriate measure of “slack” in the economy. In this work, we systematically assess the ability of variables commonly used in the literature to (i) predict and (ii) explain inflation fluctuations over time and across U.S. metropolitan areas. In particular, we exploit a newly constructed panel dataset with job openings and vacancy filling cost proxies covering 1982–2022. We find that the vacancy-unemployment (V/U) ratio and vacancy filling cost proxies outperform other slack measures, in particular the unemployment rate. Beveridge curve shifts—notably, movements in matching efficiency—are responsible for the superior performance of the V/U ratio over unemployment.</div></div>","PeriodicalId":48407,"journal":{"name":"Journal of Monetary Economics","volume":"148 ","pages":"Article 103660"},"PeriodicalIF":4.3,"publicationDate":"2024-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142177714","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-11-01DOI: 10.1016/j.jmoneco.2024.103652
Alberto Binetti , Francesco Nuzzi , Stefanie Stantcheva
This paper studies people’s understanding of inflation—their perceived causes, consequences, trade-offs-and the policies supported to mitigate its effects. We design a new, detailed online survey based on the rich existing literature in economics with two experimental components — a conjoint experiment and an information experiment — to examine how well public views align with established economic theories. Our key findings show that the major perceived causes of inflation include government actions, such as increased foreign aid and war-related expenditures, alongside rises in production costs attributed to recent events like the COVID-19 pandemic, oil price fluctuations, and supply chain disruptions. Respondents anticipate many negative consequences of inflation but the most noted one is the increased complexity and difficulty in household decision-making. Partisan differences emerge distinctly, with Republicans more likely to attribute inflation to government policies and foresee broader negative outcomes, whereas Democrats anticipate greater inequality effects. Inflation is perceived as an unambiguously negative phenomenon without any potential positive economic correlates. Notably, there is a widespread belief that managing inflation can be achieved without significant trade-offs, such as reducing economic activity or increasing unemployment. These perceptions are hard to move experimentally. In terms of policy responses, there is resistance to monetary tightening, consistent with the perceived absence of trade-offs and the belief that it is unnecessary to reduce economic activity to fight inflation. The widespread misconception that inflation rises following increases in interest rates even leads to support for rate cuts to reduce inflation. There is a clear preference for policies that are perceived to have other benefits, such as reducing government debt in progressive ways or increasing corporate taxes, and for support for vulnerable households, despite potential inflationary effects.
{"title":"People’s understanding of inflation","authors":"Alberto Binetti , Francesco Nuzzi , Stefanie Stantcheva","doi":"10.1016/j.jmoneco.2024.103652","DOIUrl":"10.1016/j.jmoneco.2024.103652","url":null,"abstract":"<div><div>This paper studies people’s understanding of inflation—their perceived causes, consequences, trade-offs-and the policies supported to mitigate its effects. We design a new, detailed online survey based on the rich existing literature in economics with two experimental components — a conjoint experiment and an information experiment — to examine how well public views align with established economic theories. Our key findings show that the major perceived causes of inflation include government actions, such as increased foreign aid and war-related expenditures, alongside rises in production costs attributed to recent events like the COVID-19 pandemic, oil price fluctuations, and supply chain disruptions. Respondents anticipate many negative consequences of inflation but the most noted one is the increased complexity and difficulty in household decision-making. Partisan differences emerge distinctly, with Republicans more likely to attribute inflation to government policies and foresee broader negative outcomes, whereas Democrats anticipate greater inequality effects. Inflation is perceived as an unambiguously negative phenomenon without any potential positive economic correlates. Notably, there is a widespread belief that managing inflation can be achieved without significant trade-offs, such as reducing economic activity or increasing unemployment. These perceptions are hard to move experimentally. In terms of policy responses, there is resistance to monetary tightening, consistent with the perceived absence of trade-offs and the belief that it is unnecessary to reduce economic activity to fight inflation. The widespread misconception that inflation rises following increases in interest rates even leads to support for <em>rate cuts</em> to reduce inflation. There is a clear preference for policies that are perceived to have other benefits, such as reducing government debt in progressive ways or increasing corporate taxes, and for support for vulnerable households, despite potential inflationary effects.</div></div>","PeriodicalId":48407,"journal":{"name":"Journal of Monetary Economics","volume":"148 ","pages":"Article 103652"},"PeriodicalIF":4.3,"publicationDate":"2024-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142177733","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-11-01DOI: 10.1016/j.jmoneco.2024.103674
Robert J. Shiller
{"title":"Comments on Alberto Binetti, Francesco Nuzzi, and Stefanie Stantcheva “people's understanding of inflation”","authors":"Robert J. Shiller","doi":"10.1016/j.jmoneco.2024.103674","DOIUrl":"10.1016/j.jmoneco.2024.103674","url":null,"abstract":"","PeriodicalId":48407,"journal":{"name":"Journal of Monetary Economics","volume":"148 ","pages":"Article 103674"},"PeriodicalIF":4.3,"publicationDate":"2024-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142263189","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-11-01DOI: 10.1016/j.jmoneco.2024.103646
Donald Kohn
In these comments I extend the Romers' analysis to 1982–95, when inflation fell from 6 % to effective price stability with only one small recession. The Fed accomplished this, despite being only “moderately committed” to disinflation in the Romer classification, through careful weighing of shifting costs and benefits from tightening as inflation continued to moderate. Though policy backed off several times before stability was clearly in sight, success resulted from keeping focus on the ultimate price stability goal, pre-empting surges in inflation, and paying close attention to expectations. I close with suggestions about how the Fed can strengthen its price stability commitment in the 5-year review of its policy framework slated to begin in 2024.
{"title":"Comments on “Lessons from history for successful disinflation” by Christina D. Romer and David H. Romer","authors":"Donald Kohn","doi":"10.1016/j.jmoneco.2024.103646","DOIUrl":"10.1016/j.jmoneco.2024.103646","url":null,"abstract":"<div><div>In these comments I extend the Romers' analysis to 1982–95, when inflation fell from 6 % to effective price stability with only one small recession. The Fed accomplished this, despite being only “moderately committed” to disinflation in the Romer classification, through careful weighing of shifting costs and benefits from tightening as inflation continued to moderate. Though policy backed off several times before stability was clearly in sight, success resulted from keeping focus on the ultimate price stability goal, pre-empting surges in inflation, and paying close attention to expectations. I close with suggestions about how the Fed can strengthen its price stability commitment in the 5-year review of its policy framework slated to begin in 2024.</div></div>","PeriodicalId":48407,"journal":{"name":"Journal of Monetary Economics","volume":"148 ","pages":"Article 103646"},"PeriodicalIF":4.3,"publicationDate":"2024-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141839379","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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