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Scholarly Works (5 results)

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UC Berkeley Electronic Theses and Dissertations (2019)

In this dissertation I study recessionary environments in general, placing a special emphasis on the steps that can be taken by policy makers to alleviate the negative consequences of recessions. After the Great Recession, most advanced economies had a prolonged period of low growth and high unemployment that is slowly subsiding. Several economists have proposed the possibility that the economy has entered a regime of "secular stagnation" where demand factors and the Zero Lower Bound lead to persistently low growth. Given the current worldwide decline in interest rates, secular stagnation is a looming risk that should be taken seriously, as it would have a significant impact on welfare. All chapters of this dissertation relate to these issues. The first chapter provides a general motivation of the topic and discusses the relationships between the remaining chapters. In the second chapter, "Going Negative at the Zero Lower Bound", I investigate whether negative rates can provide an antidote against the ZLB, granting monetary authorities more room to perform expansionary policy and combat demand-induced low growth. In the third chapter, "The Cyclical Sensitivity in Estimates of Potential Output", I study whether potential output really decreases permanently after prolonged recessions, or if, in contrast, this is a byproduct of a faulty computation of potential output. I also study whether some structural VAR methodologies can avoid these shortcomings. In the fourth chapter, "Neo-Keynesian Trade", I build a dynamic model that unifies a detailed trade pattern across regions and sectors with monetary non-neutrality. The nominal friction, a downwardly rigid wage, can lead to unemployment in the face of a negative shock if the monetary authority is unwilling or unable to inflate the economy, and this effect can vary substantially across regions depending on their industrial composition. Overall, the evidence in this dissertation indicates that policy makers should do more to combat slow growth, and that they have tools to do so.

    Cover page: Essays in Macroeconomics: Monetary Policy in a Recessionary Environment.
    • Article
    • Peer Reviewed
    UC Berkeley Previously Published Works (2019)
    Tightening labor markets in the United States and other advanced economies suggest inflation should be on the rise, yet it remains subdued. Is the Phillips curve broken? We bring together surveys of household or firm expectations for 18 countries to estimate an expectations-augmented Phillips curve. We find strong evidence of a Phillips curve relationship: the Phillips curve is alive and well. The fact that inflation remains well below inflation expectations, both in the United States and abroad, suggests that there remains significant slack in labor markets.
      Cover page: Is Inflation Just Around the Corner? The Phillips Curve and Global Inflationary Pressures
      • Article
      • Peer Reviewed
      UC Berkeley Previously Published Works (2022)
      The fact that most of the persistent declines in output since the Great Recession have parlayed into equivalent declines in measures of potential output is commonly interpreted as implying that output will not return to previous trends. Using a variety of estimates of potential output for the U.S. and other countries, we show that these estimates respond gradually not only to supply-side shocks but also respond to demand shocks that have only transitory effects on output. Observing a revision in measures of potential output therefore says little about whether concurrent changes in actual output are likely to be permanent or not.
        • Article
        • Peer Reviewed
        UC Berkeley Previously Published Works (2018)
          • Article
          • Peer Reviewed
          UC Berkeley Previously Published Works (2018)
          The fact that declines in output since the Great Recession have been parlayed into equivalent declines in measures of potential output is commonly interpreted as implying that output will not return to previous trends. We show that real-time estimates of potential output for the United States and other countries respond gradually and similarly to both transitory and permanent shocks to output. Observing revisions in measures of potential output therefore tells us little about whether changes in actual output will be permanent. Some alternative methodologies to estimate potential output can avoid these shortcomings. These approaches suggest a much more limited decline in potential output since the Great Recession.
            Cover page: The Cyclical Sensitivity in Estimates of Potential Output
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