UCLA

This dissertation presents three contributions to the field of macroeconomics.

In the first chapter, I study the redistributive effects of monetary policy generated by differences in expenditure choices over goods. I show that necessities, which feature low expenditure elasticities, and are therefore consumed relatively more by low-expenditure households, have a higher frequency of price adjustments relative to luxuries. I develop a multisector monetary model with incomplete markets to quantify the effects of monetary shocks on consumption for households with different levels of labor income and financial wealth. The model can replicate the allocation of expenditure over goods observed in the US. Following an expansionary monetary shock, I find that households that are borrowing-constrained and have low labor income face inflation rates higher than the aggregate, and therefore increase their consumption less than the increase predicted by a model that doesn't account for expenditure heterogeneity.

The second chapter, joint with Juliane Begenau, Saki Bigio, and Jeremy Majerovitz, presents five facts on the behavior of U.S. banks between 2007 and 2015 that impose useful restrictions on the formulation of a bank problem. (1) Market to book leverage ratio diverged significantly during the crisis. (2) Book values appear to be backward looking. There is more information content about future bank profitability and loan losses in market values than in book values. (3) Neither market nor regulatory constraints are strictly binding for most banks. (4) Banks operate with a target market leverage ratio. (5) The adjustment behavior back to the target changed fundamentally after the crisis.

In the third chapter, also joint with Juliane Begenau, Saki Bigio, and Jeremy Majerowitz, we present ongoing work on a model that rationalizes the five facts described earlier. The goal is to produce a reduced-form partial equilibrium model that illustrates the main features that a quantitative general equilibrium model would need to match these facts. We develop an heterogeneous-bank model that rationalizes these facts and can serve as a building block for future work. An estimated version of the model successfully replicates the behaviour of market leverage and liabilites observed before and after the Great Recession.