Research

Working papers

Macroprudential Intervention and (Un)employed Households

This paper studies indirect macroprudential intervention’s effects on household welfare in a two-agent New Keynesian setting. I develop a two-agent New Keynesian DSGE model à la Gertler and Karadi (2011) to compare the welfare impacts of different monetary policy regimes in the presence of a tax policy in the banking system. I investigate whether there is a welfare benefit if a standard Taylor rule incorporates financial variables, in particular, the interest rate spread. Our results suggest that deviating from the standard Taylor rule to its augmented alternative in an unregulated economy is ineffective regarding welfare improvement. On the other hand, within a regulated economy, the maximized welfare of households is given in the presence of a tax policy and a monetary policy rule reacting to the interest rate spread. However, the results are unclear about the welfare-improving role of monetary policy in terms of economic stabilization within both unregulated and regulated economies.

Estimating Relative Risk Aversion from the Euler Equation: The Importance of Study Design and Publication Bias, with T. Havranek,  and Z. Irsova, CEPR-DP17411, June 2022 (submitted)

Estimates of relative risk aversion vary widely, but no study has attempted to quantitatively trace the sources of the variation. We collect 1,021 estimates from 92 studies that use the consumption Euler equation to measure relative risk aversion and that disentangle it from intertemporal substitution. We show that calibrations of risk aversion are systematically larger than estimates thereof. Moreover, reported estimates are systematically larger than the underlying risk aversion because of publication bias. After correction for the bias, the literature suggests a mean risk aversion of 1 in economics and 2–7 in finance contexts. The reported estimates are driven by the characteristics of data (frequency, dimension, country, stockholding) and utility (functional form, treatment of durables). To obtain these results we use recently developed nonlinear techniques to correct for publication bias and Bayesian model averaging techniques to account for model uncertainty. 

Published

Intertemporal Substitution in Labor Supply: A Meta-Analysis, with T. Havranek, R. Horvath, and Z. Irsova, Review of Economic Dynamics (forthcoming)

The intertemporal substitution (Frisch) elasticity of labor supply governs the predictions of real business cycle models, New Keynesian models, and models of taxation. We show that the mean reported estimates, and consequently calibrations, are exaggerated due to publication bias. For both the intensive and extensive margins, the literature provides over 700 estimates, with a mean of 0.5 in both cases. Correcting for publication bias and emphasizing quasi-experimental evidence reduces the mean intensive margin elasticity to 0.2 and renders the extensive margin elasticity tiny. An aggregate hours elasticity of about 0.25 is the most consistent with empirical evidence. To trace the differences in reported elasticities to differences in estimation context, we collect 23 variables reflecting study design and employ Bayesian and frequentist model averaging to address model uncertainty. On both margins, the elasticity is systematically larger for women and workers near retirement, but not enough to support an aggregate hours elasticity above 0.5. 

The Calvo Parameter Revisited: An Unbiased Insight, Applied Economics Letters, 2023

This study provides a meta-analysis of the Calvo parameter estimated within the new Keynesian Phillips curve using a data set of 509 estimates from 40 studies published in a quarter century. Novel linear and non-linear techniques suggest publication bias distorting the reported estimates towards typical values of the Calvo parameter used for calibration. Moreover, Bayesian model averaging results indicate that the reported estimates are systematically affected by various aspects of research design, particularly the choice of forcing variable in the NKPC, instrument selection, and authors’ affiliation.

Contagious Defaults in Interbank Networks, Czech Journal of Economics and Finance, 2022 

This paper investigates systemic risk and contagion processes in an interbank network using network science methods. The interbank network is studied to understand the contagion process within a network considering differences in the network structure and the characteristics of components. Simulations support the claim that heterogeneous networks are more resilient to contagious shocks, while these shocks are more problematic in homogeneous networks. This paper also shows that more interconnections among banks could accelerate or block the contagion process, depending on the structure of the network and the seniority of debts in the interbank network. 

Work in progress

Anatomy of New Keynesian Phillips Curve with N. Buliskeria (draft coming soon)

Do Two Wrongs Make a Right? Publication and Attenuation Biases in Economics (draft coming soon)

Endogenous Beliefs and Welfare Effects of Macroprudential Policy