Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

I present a behavioral epidemiological model of the evolution of the COVID epidemic in the United States and the United Kingdom over the past 12 months. The model includes the introduction of a new, more contagious variant in the UK in early fall and the US in mid December. The model is behavioral in that activity, and thus transmission, responds endogenously to the daily death rate. I show that with only seasonal variation in the transmission rate and pandemic fatigue modeled as a one-time reduction in the semi-elasticity of the transmission rate to the daily death rate late in the year, the model can reproduce the evolution of daily and cumulative COVID deaths in the both countries from Feb 15, 2020 to the present remarkably well. I find that most of the end-of-year surge in deaths in both the US and the UK was generated by pandemic fatigue and not the new variant of the virus. I then generate fore- casts for the evolution of the epidemic over the next two years with continuing seasonality, pandemic fatigue, and spread of the new variant.

Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

I propose a financial channel of wage rigidity. In recessions, rather than propping up marginal (new hires') costs of labor, rigid average wages squeeze cash flows, forcing firms to cut hiring due to financial constraints. Indeed, empirical cash flows and profits would turn acyclical if wages were only moderately more procyclical. I study this channel in a search and matching model with financial constraints and rigid wages among incumbent workers, while new hires' wages are flexible. Individually, each feature generates no amplification. By contrast, their interaction can account for much of the empirical labor market fluctuations--breaking the neutrality of incumbents' wages for hiring, and showing that financial amplification of business cycles requires wage rigidity.

Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

We study a dynamic model of environmental protection in which the level of pollution is a state variable that strategically links policy making periods. Policymakers are forward looking but politically motivated: they have heterogeneous preferences and do not fully internalize the cost of pollution. This type of political economy model is often reduced to a "modified" planner's problem, and yields predictions that are qualitatively similar to a planner's constrained optimum, albeit with a bias: too much pollution in the steady state (or, in other applications, too little investment in public goods, too much public debt, etc.). We highlight conditions under which this reduction is not possible, and the dynamic time inconsistency generated by the political process is responsible for a new type of distortion. Under these conditions, there are equilibria in which, for a generic economy and generic initial conditions, the state evolves in complex cycles, or unpredictable chaotic dynamics. Depending on the fundamentals of the economy, these equilibria may generate ergodic distributions that consistently overshoot the planner's steady state of pollution, or that fluctuate around it.

Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

As search frictions become smaller in the market for a consumer product, buyers are able to locate and access more sellers per unit of time. In response, sellers choose to design varieties of the product that are more specialized in order to exploit differences in the buyers' preferences. I find mild conditions on the fundamentals under which the decline in search frictions and the increase in specialization have exactly offsetting effects on the extent of competition in the market. Under these conditions, price dispersion remains constant over time even though search frictions are vanishing. Buyer's surplus and seller's profit, however, grow at a constant endogenous rate, as the endogenous increase in specialization allows sellers to cater better and better to the heterogeneous desires of buyers.

Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

This paper deals with COVID and macroprudential regulations in emerging markets. I document the build-up of a sturdy macroprudential structure during 2009-2019, and the relaxation of regulations in 2020-2021, as part of the effort to deal with the sanitary emergency. I show that in every country, regulatory forbearance played a key role in the response to COVID. I discuss capital controls as macroprudential instruments. I argue that rebuilding the macroprudential fabric is important to reduce the costs of future systemic shocks. I maintain that post-COVID regulations should incorporate the risks associated with digital currencies.