The Allocation of Risk and Economic Slumps. The aim of this project is to construct and analyse models that identify a novel feedback mechanism in which the distribution of investment risk interacts with aggregate employment variations. It will provide a useable framework for economic policy analysis in which the distribution of wealth affects the demand for investment risk while the distribution of production risk affects the supply of labour income risk.
Money, price and output dynamics: a segmented asset markets approach. This project studies the importance of asset market frictions and the cross-sectional composition of nominal spending across households for the monetary policy transmission mechanism (that is, for the channels by which monetary policy affects the broader macro-economy).
Time-consistent macroeconomic policy in nonlinear models. Efforts to use fiscal policy for macro-stabilisation have led to elevated debt levels and possible default in many countries. This project examines the appropriate design of fiscal policy and its implications for debt over the business cycle.
Estimation of the continuous piecewise linear model and macroeconomic applications. Relationships between economic variables are often characterised by non-linearities. This project develops a method to analyse a type of non-linearity that is frequently encountered in economics and uses this method to study four specific applications concerning the dynamics of inflation, growth, and the exchange rate.
Understanding the sources of secular stagnation. This project aims to examine why long-run projections of output, inflation, and interest rates have become lower for many economies in recent years resulting in a phenomenon often referred to as secular stagnation. The project intends to develop new econometric tools to account for sources of structural breaks and stochastic trends in order to quantify the roles of productivity growth, financial shocks, demographics, and inflation expectations in ....Understanding the sources of secular stagnation. This project aims to examine why long-run projections of output, inflation, and interest rates have become lower for many economies in recent years resulting in a phenomenon often referred to as secular stagnation. The project intends to develop new econometric tools to account for sources of structural breaks and stochastic trends in order to quantify the roles of productivity growth, financial shocks, demographics, and inflation expectations in driving secular stagnation. Expected outcomes include findings that will help guide macroeconomic policy responses to stagnation and new econometric tools that will support future applied research on changes in the behaviour of macroeconomic variables.Read moreRead less
Optimal policy in the global liquidity trap. The recent global financial crisis has led most central banks in developed economies to reduce their policy interest rates to unprecedentedly low levels. As a result, the liquidity trap has now become a serious concern internationally. This project will derive the optimal monetary and fiscal policy in the global liquidity trap. It will also show how a shock in one country affects other countries and propose tools for improving the empirical fit of the ....Optimal policy in the global liquidity trap. The recent global financial crisis has led most central banks in developed economies to reduce their policy interest rates to unprecedentedly low levels. As a result, the liquidity trap has now become a serious concern internationally. This project will derive the optimal monetary and fiscal policy in the global liquidity trap. It will also show how a shock in one country affects other countries and propose tools for improving the empirical fit of the models in a liquidity trap. This project will become the foundation for the discussion of policy options in the global liquidity trap.Read moreRead less
Macroeconomic Consequences of Macroprudential Policy. This project aims to investigate the macroeconomic consequences of macroprudential policies and to provide robust, empirically-based advice to policy-makers about how they should be conducted. The global financial crisis motivated many nations to introduce new policies – known as macroprudential policies – with the explicit goal of maintaining financial stability. Important components of the project include estimation of a multisector small o ....Macroeconomic Consequences of Macroprudential Policy. This project aims to investigate the macroeconomic consequences of macroprudential policies and to provide robust, empirically-based advice to policy-makers about how they should be conducted. The global financial crisis motivated many nations to introduce new policies – known as macroprudential policies – with the explicit goal of maintaining financial stability. Important components of the project include estimation of a multisector small open economy model with interactions between the financial sector and the rest of the macroeconomy and development of new methods to evaluate these policies. Assessing the sensitivity of the performance of macroprudential policies to variations in key dimensions of the model is another important aspect.Read moreRead less
Heuristic-based behavioural models with an application to macroeconomics. This project will develop behavioural micro-foundations for economic models with heterogeneous agents. In these models the interaction of decision rules used by agents leads to complex phenomena at the aggregate level, for example, the cycles of bubbles and crashes. The agents switch between decision rules on the basis of past performance. However, a broad range of specifications of the rules and switching mechanisms has l ....Heuristic-based behavioural models with an application to macroeconomics. This project will develop behavioural micro-foundations for economic models with heterogeneous agents. In these models the interaction of decision rules used by agents leads to complex phenomena at the aggregate level, for example, the cycles of bubbles and crashes. The agents switch between decision rules on the basis of past performance. However, a broad range of specifications of the rules and switching mechanisms has led to many degrees of freedom in modelling. In this project, laboratory experiments with paid human subjects will be used to discipline this modelling. The resulting models will improve macroeconomic and financial policy responses to volatile market conditions.Read moreRead less
Pooling econometric models for prediction and decision making. The project develops methods for combining econometric models with the goal of improving prediction. It applies these methods to macroeconomic models used to improve monetary policy and to asset return models used to improve financial risk management.
Commodity cycles. The implications of resource demand by emerging markets are issues policy makers need to understand. This project address these by focusing on currency, equity and commodity linkages, the financial market and macroeconomic effects of currency collapse, and the role of emerging markets in mitigating/amplifying economic shock transmission.