{"title":"Comment","authors":"Oleg Itskhoki","doi":"10.1086/723587","DOIUrl":"https://doi.org/10.1086/723587","url":null,"abstract":"The heterogeneous agent New Keynesian (HANK) framework has become a leading framework for the analysis of both monetary and, especially,fiscal policy transmission in a closed economy.What are the implications of HANK for open economy dimensions such as the magnitude and the composition of current account deficits? In particular, what were the open economy implications—for capital flows, current account imbalances, and exchange rate adjustment—of the massive fiscal policy response to the COVID-19 pandemic? The current paper addresses these questions by adopting a version of an open economyHANKmodel developed in the earlier work of the authors, which features household heterogeneity in terms of wealth and marginal propensity to consume, nominal wage rigidities, and home bias in consumption that leads to equilibrium real exchange rate dynamics. The paper then asks what the implications are of a HANK framework for current account adjustment in response to a pandemic shock and the fiscal policy that accommodated it. In my discussion, I instead ask what the patterns of current account and exchange rate adjustment are in response to these shocks in the data, and what the likely first-order theoretical mechanisms needed to explain them are. The HANKmodel provides sharp intuitive predictions for the macroeconomic response of aggregate savings to a differential fiscal transfer shock across countries, as summarized in the concluding figure 14 in the paper. A larger local fiscal transfer turns into increased local consumption expenditure by high marginal propensity to consume agents, spread over","PeriodicalId":51680,"journal":{"name":"Nber Macroeconomics Annual","volume":"37 1","pages":"413 - 422"},"PeriodicalIF":7.7,"publicationDate":"2023-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43862411","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Rishabh Aggarwal, Adrien Auclert, M. Rognlie, Ludwig Straub
{"title":"Excess Savings and Twin Deficits: The Transmission of Fiscal Stimulus in Open Economies","authors":"Rishabh Aggarwal, Adrien Auclert, M. Rognlie, Ludwig Straub","doi":"10.1086/723586","DOIUrl":"https://doi.org/10.1086/723586","url":null,"abstract":"Three salient facts have emerged in the world economy since 2020. First, a large increase in private savings around the world, especially in the United States. Second, an increase in the current account deficit in the United States, with a corresponding surplus in the rest of the world. Third, a large increase in the fiscal deficit around the world, especially in the United States. In this paper, we argue that the third fact caused the first two. We do so in the context of a many-country heterogeneous-agent model in which deficit-financed fiscal transfers simultaneously lead to a large increase in private savings (“excess savings”) and persistent current account deficits (“twin deficits”). Our model is also consistent with the distribution of U.S. checking account balances over this period: in the model and the data, a few quarters after a fiscal transfer, most of the excess savings are held by the rich. At this point, there is still a contribution to demand from spending down excess savings, but it is limited by the low marginal propensities to consume of the rich.","PeriodicalId":51680,"journal":{"name":"Nber Macroeconomics Annual","volume":"37 1","pages":"325 - 412"},"PeriodicalIF":7.7,"publicationDate":"2023-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45337046","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Comment","authors":"Eric Zwick","doi":"10.1086/723536","DOIUrl":"https://doi.org/10.1086/723536","url":null,"abstract":"Aside from giving us a terrific title, Eisfeldt, Falato, and Xiaolan have written an important andprovocative paper. Theydemonstrate amastery of accounting intricacies and deftly deploy this knowledge to motivate compelling reduced-form empirical analysis and transparent structural estimation. The basic premise of the paper is straightforward: stock-based compensation has increased in importance over time, and its measurement in the national accounts has not kept up. Accordingly, we are missing a large and increasing share of labor income in the national accounts. Thismissing labor income implicates a panoply of central questions in contemporary economics. Among the key results, correcting for thismischaracterized income accounts for one-third of the labor share decline in manufacturing and all of the decline for nonproduction workers. In the structural estimation, this correction recovers the complementarity of skill and capital, explored in Krusell et al. (2000) and a rich subsequent literature. In addition, themodel-implied estimates point toward substitution between wages and stock-based compensation; in other words, this compensation is better thought of as a component of the marginal product of labor rather than bargaining rents. These are important and fascinating results. I see the paper as a major contribution with ample room for follow-on work. My comments will focus on (i) drawing some connections between these findings and other patterns in the data, (ii) providing additional data and calculations to support the basic premise of the paper, and (iii) using the paper’s results to reinterpret other puzzles. In short, I see the paper as being even better than the authors do and congratulate them on this contribution.","PeriodicalId":51680,"journal":{"name":"Nber Macroeconomics Annual","volume":"37 1","pages":"74 - 83"},"PeriodicalIF":7.7,"publicationDate":"2023-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48986736","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Comment","authors":"Richard Rogerson","doi":"10.1086/723584","DOIUrl":"https://doi.org/10.1086/723584","url":null,"abstract":"At a general level, this paper is an exploration of the effect of departures from rational expectations in frictional models of the labor market. More specifically, it studies a handful of examples in which some (or all) workers are assumed to exhibit a very specific form of irrational expectations that Menzio labels as stubborn beliefs. As one would expect with this author, the modeling features a high level of artistry and craftsmanship, the analysis is clear and elegant, and all of the results are accompanied with strong intuition. The examples illustrate that these departures from rational expectations can have interesting effects on aggregate labor-market outcomes, and some of the results are quite provocative. In particular, he shows in one of his examples that a small subset of workerswith stubborn beliefs canmake labormarket outcomes more volatile for all workers in the labor market. That is, workers with incorrect perceptions are not just hurting themselves, they are hurting all workers. The paper also offers amethodological contribution in showing how to formulate equilibrium in frictional models with strategic wage setting and irrational beliefs. There are two key components to the exercises carried out in the paper. One component is the specification of the departure from rational expectations. The second component is the mechanism through which the specific departure from rational expectations is propagated into aggregate labor-market outcomes. Inwhat follows, I will discuss each of these in turn.","PeriodicalId":51680,"journal":{"name":"Nber Macroeconomics Annual","volume":"37 1","pages":"314 - 321"},"PeriodicalIF":7.7,"publicationDate":"2023-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"41341594","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Comment","authors":"G. Violante","doi":"10.1086/723535","DOIUrl":"https://doi.org/10.1086/723535","url":null,"abstract":"This insightful paper by Eisfeldt, Falato, and Xiaolan introduces the concept of “human capitalists,” employees below the C-suite who receive a significant share of their pay as equity-based compensation. By collecting data on reserved shares across firms, this study documents the importance of this phenomenon in the corporate manufacturing sector. It then develops a theoretical equilibrium model to organize the correct income and value-added accounting. Finally, it argues that acknowledging the existence human capitalists can change our view on two key macroeconomic questions: (i) the recent decline in the aggregate labor share is smaller than previously estimated and (ii) the degree of capital-skill complementarity in aggregate technology is stronger than we thought. This is a paper of general interest because its findings are relevant for a number of diverse literatures in economics: the measurement of workers’ compensation, beyond wages; the prevalence of incentive-based pay and the design optimal labor contracts; the dynamics of the aggregate labor share; patterns of capital-labor substitution in the aggregate economy; intangible capital; and the nature of idiosyncratic labor market (or, as it is called in finance, background) risk. The paper provides new data, new facts, and new insights that affect all these research areas where an accurate measurement of worker compensation, and how it relates to the marginal product of labor, is crucial. I will organize my comments in five parts: (i) quick model recap, (ii) measurement of the skilled labor share of income, (iii) model identification,","PeriodicalId":51680,"journal":{"name":"Nber Macroeconomics Annual","volume":"37 1","pages":"62 - 73"},"PeriodicalIF":7.7,"publicationDate":"2023-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43637773","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Comment","authors":"Ellora Derenoncourt","doi":"10.1086/723579","DOIUrl":"https://doi.org/10.1086/723579","url":null,"abstract":"The topic of long-standing US racial inequality is experiencing a revival in mainstream economics literature. Numerous studies released in recent years document the prevalence and persistence of racial gaps across several economic domains, analyze the heterogeneous impact of policies across racial groups, or develop new theoretical frameworks for understanding racial gaps. This paper makes a timely intervention in this last literature, focusing on one of the most striking forms of racial inequality, the Black-White wealth gap. This paper models the persistence of racial wealth inequality as arising from endogenous beliefs about returns on risky assets. In the authors’ model, beliefs update through learning, which is assumed to occur solely through participation in the market for risky assets (an assumption that is later relaxed to allow for learning through social networks). In the model setup, Black and White households hold equally pessimistic initial beliefs. During slavery, capital returns were very high—high enough that the expected gains exceeded that of eschewing investment even when beliefs were pessimistic. Under these circumstances, White households participated in risky asset markets and thus learned more about the true distribution of good and bad outcomes after investment. But because slavery barred Black Americans from participation in labor and capital markets, onlyWhite households were able to experiment and thus update their beliefs about returns. After slavery, Black Americans could in theory participate, but by then, returns had fallen and were no longer sufficiently","PeriodicalId":51680,"journal":{"name":"Nber Macroeconomics Annual","volume":"37 1","pages":"222 - 226"},"PeriodicalIF":7.7,"publicationDate":"2023-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48677440","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Comment","authors":"Simon Gilchrist","doi":"10.1086/723575","DOIUrl":"https://doi.org/10.1086/723575","url":null,"abstract":"This is an excellent paper that reexamines the effect of monetary policy surprises on macroeconomic activity using high-frequency methods of identification. Let me say up front that the paper is well motivated, extremely clear in its findings, and a pleasure to read. There are two main innovations in this paper relative to the existing literature. First, following others in the literature, the paper shows that high-frequency monetary policy surprises are predictable based on lagged information contained in asset prices. Controlling for this predictability provides much sharper estimates of the effect of monetary policy on macroeconomic outcomes. Second, the paper incorporates information gathered in Swanson and Jayawickrema (2021) to construct monetary policy surprises based on communications by the Federal Reserve chair that occur outside of the usual Federal OpenMarket Committee (FOMC) announcements. This greatly expands the sample available fromwhich to construct measures of monetary policy surprises and further increases accuracy. The paper also extends the modeling framework considered in the authors’ earlier work to motivate why monetary surprises may be predictable. In contrast tomodels that emphasize a “Fed information effect” regarding the state of the economy, their framework highlights the possibility that the Fed conveys information about its own policy rule. The model in the paper is stylized but conveys two essential points. First, in an environment where the private sector learns about the monetary policy rule, high-frequency monetary surprises are predictable and impulse response estimates will be biased to the extent that there","PeriodicalId":51680,"journal":{"name":"Nber Macroeconomics Annual","volume":"37 1","pages":"156 - 160"},"PeriodicalIF":7.7,"publicationDate":"2023-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45546147","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Comment","authors":"Ilse Lindenlaub","doi":"10.1086/723583","DOIUrl":"https://doi.org/10.1086/723583","url":null,"abstract":"Guido Menzio’s paper, “Stubborn Beliefs in Search Equilibrium,” provides a new and provocative approach to a set of long-standing questions in the macro labor literature. What is the source of downward wage rigidity? And how can one of the workhorse models in this literature— the random-search model pioneered by Diamond, Mortensen, and Pissarides (DMP)—generate realistic cyclical fluctuations in vacancies and unemployment? Menzio proposes a novel mechanism for wage rigidity, which relies on the presence of nonrational workers in an otherwise standard DMP model. These “stubborn” workers do not have rational expectations but instead have biased beliefs about the aggregate state of the economy. More specifically, they believe that aggregate productivity is constant and equal to its unconditional mean of the productivity distribution, failing to recognize booms or recessions. In a downturn, workers who contemplate forming a match with a firm therefore have beliefs about their outside option—the value of search—that are too optimistic, which affects the wages they bargain. In fact, wages are entirely pinned down by workers’ beliefs, because firms have no choice but to accommodate these biased beliefs as they cannot be changed. Wages are therefore too high compared with what a recession would call for; that is, they are downward sticky/rigid. As a result, firms’ incentives to post vacancies strongly diminish. In the presence of stubborn workers, aggregate productivity","PeriodicalId":51680,"journal":{"name":"Nber Macroeconomics Annual","volume":"37 1","pages":"298 - 313"},"PeriodicalIF":7.7,"publicationDate":"2023-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46198347","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Comment","authors":"M. Watson","doi":"10.1086/723576","DOIUrl":"https://doi.org/10.1086/723576","url":null,"abstract":"Bauer and Swanson ’ s paper is an important contribution to the litera-ture measuring the dynamic effects of monetary policy shocks on the macroeconomy. It shows what can go wrong using apparently exoge-nous high-frequency monetary policy surprises as instruments for monetary policy shocks, and it shows how to correct the faulty estimates and inference by incorporating appropriate control variables. It is also the fi rst paper to use the expanded set of monetary policy surprises com-piled by Swanson and Jayawickrema (2022), another important contribution. The culmination of the authors ’ work is the monthly impulse responses shown in fi gure 8 of the paper. These are the new benchmark impulse response functions for the effect of Federal Reserve monetary policy shocks on the US macroeconomy.","PeriodicalId":51680,"journal":{"name":"Nber Macroeconomics Annual","volume":"37 1","pages":"161 - 166"},"PeriodicalIF":7.7,"publicationDate":"2023-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43388273","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Comment","authors":"L. Tesar","doi":"10.1086/723588","DOIUrl":"https://doi.org/10.1086/723588","url":null,"abstract":"During the COVIDpandemic, governments undertook large fiscal interventions—initially to support households and firms during mandated shutdowns and then, as the need for social distancing abated, to revive economic activity. Beginning in early 2020, the US government passed a sequence of bills to provide COVID support, totaling some $5.8 trillion and increasing the federal debt to gross domestic product (GDP) ratio from 107% in 2019 to 136% in 2021. Governments in Europe similarly enacted an ambitious set of fiscal policies, including an expansion of social safety nets, loan guarantees to firms to protect workers and jobs, and expanded flexibility in national and local debt limits. Over the same 2019– 21 period, euro area government debt increased from 84% to 96% of GDP (International Monetary Fund, n.d.). The debt figures for the euro area as a whole mask large differences across Europe, as the countries hardest hit by the pandemic (such as Spain and Italy) saw debt increases comparable to that of the United States. Relative to the United States, European governments tended to provide more above-the-line support such as loan guarantees, whereas US fiscal interventions relied more heavily on direct transfer payments to individuals. The focus ofAggarwal et al. is the transmission of these unprecedented, COVID-related fiscal expenditures across the set of advanced economies. The paper argues that debt-financed transfers during COVID resulted in predictable changes in the current account that persist over time. Countries that made larger-than-average transfers tended to run current account surpluses, whereas those below the average ran deficits. In the","PeriodicalId":51680,"journal":{"name":"Nber Macroeconomics Annual","volume":"37 1","pages":"423 - 431"},"PeriodicalIF":7.7,"publicationDate":"2023-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43270345","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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