Search

As the economy emerges from a crisis, macroeconomic policy confronts a dilemma: a protracted stimulus can foster a more inclusive labor market recovery, yet risks igniting inflation that ultimately undermines workers’ welfare through real income erosion. This tension amplifies in the presence of the ZLB and aggregate capacity constraints. We embed this insight into a quantitative model of the US economy.

Recessions feature elevated uncertainty. We develop a nonlinear imperfect-information New Keynesian model where procyclical information quality generates endogenous countercyclical uncertainty and precautionary saving. This demand channel can overturn the inflationary impact of negative supply shocks, making them deflationary, unless monetary policy stabilizes the output gap.

Mortgage debt represents over 70% of all Canadian household financial liabilities, and the performance of these debts is critical to the health of the financial system. We explore the relationships between mortgage arrears and key macroeconomic fundamentals such as labour market variables, interest rates, house prices and inflation. We then develop a framework to assess future household mortgage stress.

This note examines how monetary policy responses to shelter inflation affect both the overall economy and different households. We find that the aggregate macroeconomic effects of responding to shelter inflation are modest, whereas the redistributive consequences across households are substantially larger.

This note reviews the emerging evidence on AI’s labour-market and productivity effects, highlighting early task-level impacts, sizable micro level productivity gains, and the macroeconomic challenges these pose for monetary policy during the transition.

The current monetary policy framework of the Fed intends to be more ’inclusive’ by running the economy hot for longer during expansions.

An economy with fixed amortization mortgages and borrowing-constrained consumers leads to the level of inflation targeted having real effects on home ownership, consumption, and debt. Using a life-cycle housing tenure choice model, we show that by front-loading real mortgage payments, higher inflation lowers steady-state home ownership and the mortgage-debt-to-income ratio.

This paper shows that survey expectations can be used to uncover how households subjectively think about inflation and unemployment dynamics jointly. The commonly documented "stagflation view", namely the households' tendency to associate inflation with a worse labor market, implies amplified impacts of supply shocks and dampened ones of demand shocks.

An alternative to the standard CES aggregator, based on non-homothetic household preferences, is proposed. Specifically, the elasticity of substitution between goods declines during periods of strong per-capita consumption and vice versa, giving firms an incentive to adjust their desired markup in response to the state of demand. Empirical evidence favouring a direct role for per-capita consumption demand in inflation determination for Canada is presented.

We identify and quantify fiscal news shocks, compiling events (2001–2023) that altered the expected path of U.S. defense expenditure. For each event, we estimate market-implied shifts in expected spending. A shift-share analysis yields a two-year, metropolitan statistical area–level GDP multiplier of approximately 1 for U.S. military build-ups.