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Safe Asset Scarcity and Aggregate Demand

Caballero, Ricardo J. - 2016

We explore the consequences of safe asset scarcity on aggregate demand in a stylized IS-LM/Mundell Fleming environment. Acute safe asset scarcity forces the economy into a "safety trap" recession. In the open economy, safe asset scarcity spreads from one country to the other via capital flows,...

Persistent link: https://www.econbiz.de/10012456630

Keynesian Production Networks and the Covid-19 Crisis : A Simple Benchmark

Baqaee, David; Farhi, Emmanuel - National Bureau of Economic Research - 2021

The Covid-19 crisis is an unusual and seemingly all-encompassing economic shock. On the one hand, it was unquestionably … a negative demand shock that, for fixed prices and incomes, reduced household spending. On the other hand, it was also … unquestionably a negative supply shock that reduced firms' ability to maintain production at pre-pandemic prices and quantities …

Persistent link: https://www.econbiz.de/10012482564

The Safety Trap

Caballero, Ricardo J. - 2014

In this paper we provide a model of the macroeconomic implications of safe asset shortages. In particular, we discuss the emergence of a deflationary safety trap equilibrium with endogenous risk premia. It is an acute form of a liquidity trap, in which the shortage of a specific form of assets,...

Persistent link: https://www.econbiz.de/10012458738

The Macroeconomic Impact of Microeconomic Shocks : Beyond Hulten's Theorem

Baqaee, David Rezza - 2017

We provide a nonlinear characterization of the macroeconomic impact of microeconomic productivity shocks in terms of reduced-form non-parametric elasticities for efficient economies. We also show how structural parameters are mapped to these reduced-form elasticities. In this sense, we extend...

Persistent link: https://www.econbiz.de/10012455536

Rare Disasters and Exchange Rates

Farhi, Emmanuel - 2008

We propose a new model of exchange rates, which yields a theory of the forward premium puzzle. Our explanation combines …

Persistent link: https://www.econbiz.de/10012464842

Productivity and Misallocation in General Equilibrium

Baqaee, David Rezza - 2017

impact of a shock can be boiled down into two components: its "pure" technology effect; and its effect on allocative …

Persistent link: https://www.econbiz.de/10012453706

Dealing with the Trilemma : Optimal Capital Controls with Fixed Exchange Rates

Farhi, Emmanuel - 2012

We lay down a standard macroeconomic model of a small open economy with a fixed exchange rate and study optimal capital controls (defined as maximizing the utility of a representative household). We provide sharp analytical and numerical characterizations for a variety of shocks. We find that...

Persistent link: https://www.econbiz.de/10012460461

Unconventional Fiscal Policy at the Zero Bound

Correia, Isabel - 2011

When the zero lower bound on nominal interest rates binds, monetary policy cannot provide appropriate stimulus. We show that in the standard New Keynesian model, tax policy can deliver such stimulus at no cost and in a time-consistent manner. There is no need to use inefficient policies such as...

Persistent link: https://www.econbiz.de/10012461899

A Short Note on Aggregating Productivity

Baqaee, David - 2019

This paper discusses two simple decompositions for aggregate productivity analysis in the presence of distortions and in general equilibrium. The first is a generalization of Baqaee and Farhi (2017) and the second is due to Petrin and Levinsohn (2012). In the process, we propose a new...

Persistent link: https://www.econbiz.de/10012479640

The Darwinian Returns to Scale

Baqaee, David - 2020

How does an increase in the size of the market due to fertility, immigration, or trade integration, affect welfare and real GDP? We study this question using a model with heterogeneous firms, fixed costs, and monopolistic competition. We decompose the change in welfare into changes in technical...

Persistent link: https://www.econbiz.de/10012481722