Uncertainty is a ubiquitous concern emphasized by policymakers. We study how uncertainty affects decision-making by the Federal Open Market Committee (FOMC). We distinguish between the notion of Fed-managed uncertainty vis-a-vis uncertainty that emanates from within the economy and which the Fed...

This paper characterizes the optimal taxation of top earners in a world with externalities. It takes a reduced-form approach that spans a broad class of models where top earners create externalities on the economy. The model allows for a flexible relationship between top earnings and the...

Positive assortative matching refers to the tendency of individuals with similar characteristics to form partnerships. Measuring the extent to which assortative matching differs between two economies is challenging when the marginal distributions of the characteristic along which sorting takes...

We present evidence that noisy financial flows influence financial conditions and macroeconomic activity. How should monetary policy respond to this noise? We develop a model where it is optimal for the central bank to target and (partially) stabilize financial conditions beyond their direct...

One of the most cherished propositions in economics is that market competition by and large raises consumer welfare. But whether political competition has similarly virtuous consequences is far less discussed. This paper formulates a model to explain why political competition may enhance...

This paper studies the choice of electoral rules, in particular, the question of minority representation. Majorities tend to disenfranchise minorities through strategic manipulation of electoral rules. With the aim of explaining changes in electoral rules adopted by US cities (particularly in...

We propose a framework for understanding recurrent historical episodes of vigorous economic expansion accompanied by extreme asset valuations, as exhibited by the U.S. in the 1990s. We interpret this phenomenon as a high-valuation equilibrium with a low effective cost of capital based on...

Quantile regression(QR) fits a linear model for conditional quantiles, just as ordinary least squares (OLS) fits a linear model for conditional means. An attractive feature of OLS is that it gives the minimum mean square error linear approximation to the conditional expectation function even...

Market power arises in the case where a seller is aware that raising output will depress price. In the profit-maximizing equilibrium with market power, price exceeds marginal cost. The Lerner index---the ratio of price less marginal cost to the price---is a widely accepted measure of market...