Accepted Papers

Reserve Accumulation, Macroeconomic Stabilization and Sovereign Risk

15 July 2023

Javier Bianchi and Cesar Sosa-Padilla

In the past three decades, governments in emerging markets have accumulated large amounts of international reserves, especially those with fixed exchange rates. This paper proposes a theory of reserve accumulation that can account for these facts. Using a model of endogenous sovereign default with nominal rigidities, we argue that the interaction between sovereign risk and aggregate demand amplification generates a macroeconomic-stabilization hedging role for international reserves.

Model Complexity, Expectations, and Asset Prices

4 July 2023

Pooya Molavi, Alireza Tahbaz-Salehi, and Andrea Vedolin

This paper analyzes how limits to the complexity of statistical models used by market participants can shape asset prices. We consider an economy in which the stochastic process that governs the evolution of economic variables may not have a simple representation, and yet, agents are only capable of entertaining statistical models with a certain level of complexity.

How Exporters Grow

3 July 2023

Doireann Fitzgerald, Stefanie Haller, and Yaniv Yedid-Levi

We use customs data for Irish firms to show that in successful episodes of export market entry, there are statistically and economically significant post-entry dynamics of quantities, but not of markups. To match these moments, we structurally estimate a model where firms can invest in future customer base through two channels: by selling more today, and by spending on marketing and advertising.

Trust in Risk Sharing: A Double-Edged Sword

3 July 2023

Harold L. Cole, Dirk Krueger, George J. Mailath, and Yena Park

We analyze efficient risk-sharing arrangements when the value from deviating is determined endogenously by another risk sharing arrangement. Coalitions form to insure against idiosyncratic income risk. Self-enforcing contracts for both the original coalition and any coalition formed (joined) after deviations rely on a belief in future cooperation which we term “trust”.

Dynamic Opinion Aggregation: Long-Run Stability and Disagreement

3 July 2023

Simone Cerreia-Vioglio, Roberto Corrao, and Giacomo Lanzani

This paper proposes a model of non-Bayesian social learning in networks that accounts for heuristics and biases in opinion aggregation. The updating rules are represented by nonlinear opinion aggregators from which we extract two extreme networks capturing strong and weak links.

When Less is More: Experimental Evidence on Information Delivery During India’s Demonetization

2 July 2023

Abhijit Banerjee, Emily Breza, Arun Chandrasekhar, and Benjamin Golub

In disseminating information, policymakers face a choice between broadcasting to everyone and informing a small number of “seeds” who then spread the message. While broadcasting maximizes the initial reach of messages, we offer theoretical and experimental evidence that it need not be the best strategy.

How Responsive are Wages to Firm-Specific Changes in Labor Demand? Evidence from Idiosyncratic Export Demand Shocks

2 July 2023

Andrew Garin and Filipe Silvério

Do firms adjust wages in response to changes in their own demand level, or to changes in competitive pressure from rival employers? We study how exporters adjust wages in response to unexpected product demand shocks during the 2008–2009 Great Recession. Using rich data on Portuguese firms’ pre-recession export shipments, we measure firm-level shocks to export demand during the Recession.

Experimentation in Endogenous Organizations

22 June 2023

Germán Gieczewski and Svetlana Kosterina

We study policy experimentation in organizations with endogenous membership. An organization decides when to stop a policy experiment based on its results. As information arrives, agents update their beliefs, and enter or leave the organization based on their expected flow payoffs.

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Reserve Accumulation, Macroeconomic Stabilization and Sovereign Risk

Model Complexity, Expectations, and Asset Prices

How Exporters Grow

Trust in Risk Sharing: A Double-Edged Sword

Dynamic Opinion Aggregation: Long-Run Stability and Disagreement

When Less is More: Experimental Evidence on Information Delivery During India’s Demonetization

How Responsive are Wages to Firm-Specific Changes in Labor Demand? Evidence from Idiosyncratic Export Demand Shocks

Experimentation in Endogenous Organizations

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