WORKING PAPERS
'Optimal Taxation of Risky Entrepreneurial Capital', with Corina Boar. (abstract) (slides) (pdf)
'The Revelation Incentive for Issue Engagement in Campaigns', with Chitralekha Basu. (abstract) (pdf)
'Capital Deaccumulation and the Large Persistent Effects of Financial Crises.' (abstract) (slides) (pdf)
In a panel of OECD and emerging economies, I find that recessions are associated with larger initial drops in investment and more persistent drops in output if they occur simultaneously with banking crises. Furthermore, the banking crises that are followed by more persistent output slumps are associated with particularly large initial drops in investment. I show that these patterns can arise in a model where a financial shock temporarily increases the costs of external finance for investing entrepreneurs. This leads to a drop in investment and a persistent slump in output. Critical to the model is the distinction between different types of capital with different depreciation rates. Intangible capital and equipment have high depreciation rates, leading these stocks to drop substantially when investment falls after a financial shock. If wages display some rigidity, this induces a slump in output and employment that persists for roughly a decade, through the contribution of equipment and intangibles to production and labor demand. I find that this mechanism can account for almost a third of the persistent drop in output and employment in the US Great Recession (2007-2014). In the model, TFP and government spending shocks lead to relatively smaller declines in investment and less persistent drops in output, so the model is also consistent with the more transitory output drops seen after non-financial recessions, where such shocks may have been more important.
'The Nash Wage Elasticity and Its Business Cycle Implications', with Mario Lupoli. (abstract) (available on request)
WORKS IN PROGRESS
'Quantifying the Macroeconomic Impact of Credit Expansions', with Corina Boar, Kjetil Storesletten and Yicheng Wang. (abstract)
'Optimal Taxation of Risky Entrepreneurial Capital', with Corina Boar. (abstract) (slides) (pdf)
'The Revelation Incentive for Issue Engagement in Campaigns', with Chitralekha Basu. (abstract) (pdf)
'Capital Deaccumulation and the Large Persistent Effects of Financial Crises.' (abstract) (slides) (pdf)
In a panel of OECD and emerging economies, I find that recessions are associated with larger initial drops in investment and more persistent drops in output if they occur simultaneously with banking crises. Furthermore, the banking crises that are followed by more persistent output slumps are associated with particularly large initial drops in investment. I show that these patterns can arise in a model where a financial shock temporarily increases the costs of external finance for investing entrepreneurs. This leads to a drop in investment and a persistent slump in output. Critical to the model is the distinction between different types of capital with different depreciation rates. Intangible capital and equipment have high depreciation rates, leading these stocks to drop substantially when investment falls after a financial shock. If wages display some rigidity, this induces a slump in output and employment that persists for roughly a decade, through the contribution of equipment and intangibles to production and labor demand. I find that this mechanism can account for almost a third of the persistent drop in output and employment in the US Great Recession (2007-2014). In the model, TFP and government spending shocks lead to relatively smaller declines in investment and less persistent drops in output, so the model is also consistent with the more transitory output drops seen after non-financial recessions, where such shocks may have been more important.
'The Nash Wage Elasticity and Its Business Cycle Implications', with Mario Lupoli. (abstract) (available on request)
WORKS IN PROGRESS
'Quantifying the Macroeconomic Impact of Credit Expansions', with Corina Boar, Kjetil Storesletten and Yicheng Wang. (abstract)
