Abstract This paper empirically examines the effects of fiscal measures during COVID-19, using a novel database of daily fiscal policy announcements—classified by type of fiscal measure—and high-frequency economic indicators for 52 countries from January 1 to December 31, 2020. Results suggest that fiscal policy announcements have been effective in stimulating economic activity, boosting confidence, and reducing unemployment, but their effect varies by type of measure and country characteristics. Emergency lifeline measures are more effective when containment policies are stringent, providing ..read more

Abstract During the U.S. National Banking Period (1863–1913), a network of correspondent bank relationships created vulnerabilities to bank failures and financial panics. Using data on correspondent relationships for all national, state, savings, and private banks just before the Panic of 1893, along with the precise dates of bank suspensions, we show that prior suspensions of both upstream and downstream correspondents increased the likelihood that a given bank would itself suspend, and that these effects varied over the Panic. Conditional on suspension, banks with prior correspondent suspens ..read more

Abstract During the years of the Bretton Woods system, Milton Friedman and Harry Johnson, respectively, authored two of the most influential articles on exchange-rate systems. Friedman's article, “The Case for Flexible Exchange Rates,” was published in 1953. Johnson's article, published 16 years later, carried the almost identical title—“The Case for Flexible Exchange Rates, 1969.” While both articles achieved classic status in the 1970s and the 1980s, Johnson's essay appears to have surpassed Friedman's essay in stature in the view of some economists. This paper provides a comparison of the a ..read more

Abstract This paper investigates the relationship between heterogeneity in sectoral price stickiness and the response of the economy to aggregate real shocks. We show that sectoral heterogeneity reduces inflation persistence for a constant average duration of price spells, and that inflation persistence can fall despite duration increases associated with increases in heterogeneity. We also find that sectoral heterogeneity reduces the persistence and volatility of interest rate and output gap for a constant price spells duration, while the qualitative impact on inflation volatility tends to be ..read more

Abstract We use the staggered introduction of new flight routes to identify reductions in travel time between banks’ headquarters and branches to examine their effects on branch outputs and efficiency. Reductions in headquarters–branch travel time increases branch-level mortgage origination volume, and these loans exhibit higher ex post performance. Further analyses suggest these effects are due to branch employees working harder and more efficiently in seeking new customers and screening applications. Overall, our results imply that geographic proximity enables bank headquarters to monitor br ..read more

Abstract This paper quantifies the roles played by income-level heterogeneity in the response of consumption to monetary policy shocks using U.S. household data. We show empirically that the response of consumption to expansionary monetary policy shocks is larger for high-income households than for low-income households. Empirical facts related to household characteristics suggest two channels: the presence of illiquid assets and heterogeneity in government transfers. Motivated by these empirical findings, we develop a model that incorporates illiquid assets and heterogeneity in government tra ..read more

Abstract I propose an approach to quantify attention to inflation and show that attention declined after the Great Inflation period. This decline in attention has important implications for monetary policy as it renders managing inflation expectations more difficult and can lead to inflation-attention traps: prolonged periods of a binding lower bound and low inflation due to slowly adjusting inflation expectations. As attention declines, the optimal policy response is to increase the inflation target. The lower bound fundamentally changes the normative implications of declining attention: lowe ..read more

Abstract Examining two decades of loan-level data on Italian bank loans to households and businesses, we find that credit fluctuations primarily result from changes in the number of borrowers (extensive margin). Employing a flow approach, we decompose the extensive margin into inflows and outflows, revealing that borrower inflows significantly contribute to total borrower volatility. Moreover, borrower inflows exhibit greater volatility than outflows, are procyclical, and lead the business cycle. Utilizing a shift-and-share instrument derived from sectoral borrower inflows, our findings reveal ..read more

Abstract Market freezes are an interesting and theoretically challenging phenomenon —they are observed empirically, but cannot occur in standard models. This paper develops a formal theory of recurrent freezes emphasizing liquidity and self-fulfilling prophecies. While it is well understood how to get hot and cold spells, where prices and quantities fluctuate, we get asset market freezes and thaws where trade completely stops and starts. The simplest specification gets this using negative asset returns. Other specifications use information frictions or fixed costs. We also consider credit free ..read more

Abstract In this paper, we provide a template for constructing monetary policy shocks for emerging economies. Our approach synthesizes financial data with a narrative analysis of central bank communication and related media coverage. We create a publicly available time-series database of policy dates and shocks for the Reserve Bank of India (RBI). Our shocks suggest that financial markets infer information about the future path of policy rate from RBI communication. Bond and stock markets react strongly to these monetary shocks but exhibit heterogeneity across governor regimes. Finally, we use ..read more