October 24, 2024, Filed Under: Working PaperIlliquid Lemon Markets and the Macroeconomy EMPCT Working Paper Series No. 2024-03106 pages | PDF Download | PDF in Browser Citation:Bierdel, Aimé, Andres Drenik, Juan Herreño, and Pablo Ottonello, “Illiquid Lemon Markets and the Macroeconomy” October, 2024 Aimé BierdelColumbia University Andres DrenikUT Austin Juan HerreñoUC San Diego Pablo OttonelloUniversity of Maryland and NBER AbstractWe study the macroeconomic implications of asymmetric information in capital markets. We build a quantitative capital-accumulation model in which capital is traded in illiquid markets, with sellers having more information about capital quality than buyers. Asymmetric information distorts the terms of trade for sellers of high-quality capital, who list higher prices and are willing to accept lower trading probabilities to signal their type. Led by the model’s predictions, we measure the distortions from asymmetric information by studying the relationship between listed prices and trading probabilities in a unique dataset of individual capital units listed for trade. By combining the empirical measurement with the model, we show that information asymmetries can play a quantitatively large role during economic crises when the degree of asymmetric information deteriorates.
October 24, 2024, Filed Under: Working PaperThe Inflation Attention Threshold and Inflation Surgers EMPCT Working Paper Series No. 2024-02 72 pages | PDF Download | PDF in Browser Citation:Pfäuti, Oliver, “The Inflation Attention Threshold and Inflation Surges” October, 2024. Oliver PfäutiThe University of Texas at Austin AbstractAt the outbreak of the recent inflation surge, the public’s attention to inflation was low but increased quickly once inflation started to rise. In this paper, I quantify when and by how much the public’s attention to inflation changes, and derive the macroeconomic implications of these attention changes. I estimate an attention threshold at an inflation rate of about 4%,and that attention doubles when inflation exceeds this threshold. Adverse supply shocks become more inflationary in times of high attention, and the increase in people’s attention to inflation in 2021 accounts for half of the subsequent supply-driven inflation. I develop a model accounting for the attention threshold and show that shocks that are usually short lived lead to a persistent surge in inflation if they induce an increase in people’s attention. The attention threshold further lengthens the last mile of disinflation after an inflation surge, and leads to an asymmetry in the dynamics of inflation.
October 18, 2024, Filed Under: Working PaperKeeping Up with the Jansens: Causal Peer Effects on Household Spending, Beliefs and Happiness EMPCT Working Paper Series No. 2024-01 98 pages | PDF Download | PDF in Browser Citation:van Rooij, Maarten, Olivier Coibion, Dimitris Georgarakos, Bernardo Candia, and Yuriy Gorodnichenko, “Keeping Up with the Jansens: Causal Peer Effects on Household Spending, Beliefs and Happiness” September, 2024. Maarten van RooijEuropean Central Bank and De Nederlandsche Bank Olivier CoibionUT Austin and NBER Dimitris GeorgarakosEuropean Central Bank and CEPR Bernardo CandiaUC Berkeley Yuriy GorodnichenkoUC Berkeley and NBER AbstractHow strong are peer effects on the beliefs and behavior of individuals? We use a representative survey of households in the Netherlands to first elicit respondents’ perceptions about the income and debt of their peers. We then implement a randomized control trial (RCT) in which treated respondents are told about either average income or debt of individuals like them and was successful at moving respondents’ beliefs about their relative standing. We find that individuals with exogenously higher perceived relative income become more opposed to redistribution and increase the amount of time they spend socializing with peers. While we find some evidence of reallocative “keeping up with the Joneses” on spending, the quantitative magnitude is small in the months following the information experiment. When workers learn that their peers earn more than they thought, they become more likely to be employed in subsequent months. Finally, believing that one earns more than peers causally leads to large positive effects on happiness, above and beyond effects coming from spending more time with peers, changing beliefs about redistribution, or changes in spending patterns.
