News about aggregate demand and the business cycle

The plausibility of expectations-driven cyclical fluctuations in an otherwise standard one-sector real business cycle model with variable capital utilization and mild increasing returns-to-scale in production is examined. Due to a dominating wealth effect, our model is able to generate qualitatively as well as quantitatively realistic aggregate fluctuations driven by news impulses to future consumption demand or government spending on goods and services. When the economy is subject to anticipated total factor productivity or investment-specific technology shocks, the relative strength of the intertemporal substitution effect needs to be enhanced for our model to exhibit positive macroeconomic co-movement and business cycle statistics that are consistent with the data.     

Uncertainty shocks and unemployment dynamics in U.S. recessions

What are the effects of uncertainty shocks on unemployment dynamics? We answer this question by estimating non-linear (Smooth-Transition) VARs with post-WWII U.S. data. The relevance of uncertainty shocks is found to be much larger than that predicted by standard linear VARs in terms of (i) magnitude of the reaction of the unemployment rate to such shocks, and (ii) contribution to the variance of the prediction errors of unemployment at business cycle frequencies. The ability of different classes of DSGE models to replicate our results is discussed.     

Credit market imperfections,labor markets,and leverage dynamics in emerging economies

Emerging economies (EMEs) have different credit and labor market structures relative to advanced economies. We document that economies with larger self-employment shares tend to exhibit less countercyclical leverage dynamics. We build a model where formal credit markets, input credit relationships, and the structure of labor markets interact that (1) captures a comprehensive set of EME business cycle regularities and (2) rationalizes our new fact. The interaction between firms’ net worth, interfirm input credit, and self-employment underlying our framework is critical for explaining our fact and is supported by the data.     

Macroeconomic dynamics in a model of goods,labor, and credit market frictions

Goods market frictions drastically change the dynamics of the labor market, both in terms of persistence and volatility. In a model with three imperfect markets – goods, labor, and credit – we find that credit and goods market imperfections are substitutable in raising volatility. Goods market frictions are unique in generating persistence. Two key mechanisms in the goods market generate large hump-shaped responses to productivity shocks: countercyclical goods market tightness and prices alter future profit flows and raise persistence; procyclical search effort of consumers and firms raises amplification. Goods market frictions are thus key in understanding labor market dynamics.     

Information demand during the COVID-19 pandemic

We investigate the demand for financial information during the initial months of the COVID-19 pandemic. Using Google search data for individual stocks, we show that the Abnormal Google Search Volume Index declined significantly between March and June of 2020. We find a similar effect around earnings announcements dates, which confirms that the demand for financial information by retail investors declined during the pandemic. Our results are indicative of potentially important consequences for information diffusion, price discovery and market efficiency under extreme uncertainty. We discuss possible explanations for these results.     

Land prices and unemployment

We integrate the housing market and the labor market in a dynamic general equilibrium model with credit and search frictions. We argue that the labor channel, combined with the standard credit channel, provides a strong transmission mechanism that can deliver a potential solution to the Shimer (2005) puzzle. The model is confronted with U.S. macroeconomic time series. The estimation results account for two prominent facts observed in the data. First, land prices and unemployment move in opposite directions over the business cycle. Second, a shock that moves land prices also generates the observed large volatility of unemployment.     

Analysis of the hysteresis of unemployment in Mexico in the face of macroeconomic shocks

This research presents the behavior of the Mexican unemployment rate and shows the dependence with own history and macro variables. The concept of hysteresis or persistence tries to separate this inertia in the unemployment rate and some macroeconomic and endogenous factors. The results show a high inertia in the Mexican labor market, justified by the monetary levels and the dependence of the investment levels, considering the shocks of exports that affect the unemployment in the long term.