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Monetary Policy and Heterogeneity: An Analytical Framework

Florin O. Bilbiie

THANK is a tractable heterogeneous-agent New-Keynesian model that captures analytically core micro-heterogeneity channels of quantitative-HANK: cyclical inequality and risk; self-insurance, precautionary saving, and realistic intertemporal marginal propensities to consume. I use it to elucidate key transmission mechanisms and dynamic properties of HANK models. Countercyclical inequality yields aggregate-demand amplification and makes determinacy with Taylor rules more stringent; but solving the forward guidance puzzle requires procyclical inequality: a Catch-22.

Job Applications and Labor Market Flows

Serdar Birinci, Kurt See, and Shu Lin Wee

Job applications have risen over time, yet job-finding rates remain unchanged. Meanwhile, separations have declined. We argue that increased applications raise the probability of a good match rather than the probability of job-finding. Using a search model with multiple applications and costly information, we show that when applications increase, firms invest in identifying good matches, reducing separations.

Falling Interest Rates and Credit Reallocation: Lessons from General Equilibrium

Vladimir Asriyan, Luc Laeven, Alberto Martin, Alejandro Van der Ghote, and Victoria Vanasco

We show that in a canonical model with heterogeneous entrepreneurs, financial frictions, and an imperfectly elastic supply of capital, a fall in the interest rate has an ambiguous effect on aggregate economic activity. In partial equilibrium, a lower interest rate raises aggregate investment both by relaxing financial constraints and by prompting relatively less productive entrepreneurs to invest. In general equilibrium, however, this higher demand for capital raises its price and crowds out investment by more productive entrepreneurs.

What Good are Treatment Effects without Treatment? Mental Health and the Reluctance to Use Talk Therapy

Christopher J. Cronin, Matthew P. Forsstrom, and Nicholas W. Papageorge

Evidence across disciplines suggests that talk therapy is more curative than antidepressants for mild-to-moderate depression and anxiety. Yet, few patients use it. We develop a dynamic choice model to analyze patient demand for the treatment of depression and anxiety. The model incorporates myriad potential impediments to therapy use along with links between mental health improvements and earnings. The estimated model reveals that mental health improvements are valuable, directly through utility and indirectly through earnings.

Should We Prevent Off-Label Drug Prescriptions? Empirical Evidence from France

Tuba Tuncel

After a drug obtains marketing authorization, the usage depends on the regulation of off-label prescriptions for unapproved indications. We investigate the impact of off-label prescription regulation on physicians’ behavior, patients’ health, treatment costs, and pharmaceutical firms’ pricing with a structural demand and supply model. Exploiting rich panel data on physicians’ activities and office visits in France over nine years, we use a model of prescription choice and health outcomes with unobserved patient-level heterogeneity. We identify the demand for on-label and off-label drugs and the effect of prescription choice on health outcomes.

Reputational Bargaining with External Resolution Opportunities

Mehmet Ekmekci and Hanzhe Zhang

Two parties negotiate in the presence of external resolution opportunities (e.g., court, arbitration, or war). The outcome of external resolution depends on the privately held justifiability/strength of their claims. A justified party issues an ultimatum for resolution whenever possible, but an unjustified party strategically bluffs with an ultimatum to establish a reputation for being justified. We show that the availability of external resolution opportunities can benefit or hurt an unjustified party in equilibrium.

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More evidence that changing the UI system has large effects on inflows to unemployment. We document the importance of this separation rate channel for 🇩🇪 after the Hartz reforms & explain its importance using economic theory. @BenjaminHartung @makro_philip

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📣Finally out in #Restud our paper “Bewley Banks” - with great @RustamJamilov

A model with incomplete insurance, heterogeneous *banks*, idiosyncratic risk and aggregate uncertainty.

Analog for banks of Bewley-Aiyagari-Krusell-Smith setup for consumers.👇#econtwitter

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Recently accepted to #REStud, "Women in the Courtroom: Technology and Justice," from Heng Chen, Yuyu Chen and Yang:

https://www.restud.com/women-in-the-courtroom-technology-and-justice/

#econtwitter
#justice #GenderBias #JudicialReform

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Recently accepted to #REStud, "The Geography of Business Dynamism and Skill-Biased Technical Change," from Hannah Rubinton:

https://www.restud.com/the-geography-of-business-dynamism-and-skill-biased-technical-change/

#econtwitter

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