...więc trzeba koordynować lockdowny. GRAPE | Tłoczone z danych dla DGP
Jacek is an Associate Professor of Economics at the United States Naval Academy, and he joined us to work on projects in the area of Dynamic Macroeconomics. Jacek earned his PhD from the University of Minnesota. His current research focuses on international capital flows.
Opublikowane | Published
Local containment policies and country-wide spread of Covid-19 in the United States: an epidemiologic analysis | Regional Studies Przeczytaj streszczenie | Read abstract
We analyze spatial diffusion of new Covid-19 cases and country-wide impact of state-specific containment policies during the early months of the Covid-19 pandemic in the United States. We first use spatial econometric techniques to document direct and indirect spillovers of new infections across county and state lines, as well as the impact of individual states' lock-down policies on infections in neighboring states. We find consistent statistical evidence that new cases diffuse across county lines, holding county level factors constant, and that the diffusion across counties was affected by the closure policies of adjacent states. We then develop a spatial version of the epidemiological SIR model where new infections arise from interactions between infected people in one state and susceptible people in the same or in neighboring states. We incorporate lock-down policies into our model and calibrate the model to match both the cumulative and the new infections across the 48 contiguous U.S. states and DC. Our results suggest that, had the states with the less restrictive social distancing measures tightened them by one level, the cumulative infections in other states would be about 5% smaller. In our spatial SIR model, the spatial containment policies such as border closures have a bigger impact on flattening the infection curve in the short-run than on the cumulative infections in the long-run.
Non-traded goods, factor markets frictions, and international capital flows | Review of Economic Dynamics Przeczytaj streszczenie | Read abstract
The canonical one-sector model over predicts international capital flows by a factor of ten. We show that introducing a non-traded goods sector can reconcile the differences between the theoretical predictions and the observed flows. We analyze the quantitative impact of the non-traded sector using a calibrated model of a small open economy, in which non-traded goods are used in consumption and investment, and need capital and labor to be produced. The model features international frictions directly affecting international borrowing and lending, as well as domestic frictions that limit the scope of inter-sectoral reallocation of capital and labor. We find that: (1) the impact of domestic frictions on the size of international capital flows is similar to the impact of international frictions, and (2) the median elasticity of capital flows with respect to international frictions in the two-sector model with costly inter-sectoral reallocation is about 50-60% lower than that same elasticity in the one-sector model.
The full set of replication codes and data is available here.
Optimal federal transfers during uncoordinated response to a pandemic | Journal of Public Economic Theory Przeczytaj streszczenie | Read abstract
An outbreak of a deadly disease pushes policymakers to depress economic activity due to externalities associated with individual behavior. Sometimes, these decisions are left to local authorities (e.g., states). This creates another externality, as the outbreak doesn't respect states' boundaries. A strategic Pigouvian subsidy that rewards states which depress their economies more than the average corrects that externality by creating a race-to-the-bottom type of response. In a symmetric equilibrium nobody receives a subsidy, but the allocation is efficient. If states are concerned about unequal burden of the lockdown costs, but cannot easily issue new debt to finance transfer payments, then lock-downs will be insufficient in some areas and excessive in others. When that's the case, federal stimulus checks can limit the extent of local outbreaks.
Optimal teleworking agreements vs. yearning for normality when vaccine is on the horizon | Economics Bulletin Przeczytaj streszczenie | Read abstract
During a pandemic, companies may adopt teleworking agreements even if they lower current productivity. If managers (or policymakers) want to project an image of ``return to normality'', completely orthogonal to any economic or health outcomes, the scope of teleworking agreements is lower but constant in a stationary equilibrium. In response to the news about upcoming vaccine, rational managers always increase the scope of teleworking agreements, unless the desire to project the image of ``return to normality'' is sufficiently strong, effectively creating a reopening-smoothing motive. The ``return to normality'' may be premature if managers do not understand Lucas' Critique.
Strategic inefficiencies and federal redistribution during uncoordinated response to pandemic waves | European Journal of Political Economy Przeczytaj streszczenie | Read abstract
Optimal policy during an epidemic includes depressing economic activity to slow down the outbreak. Sometimes, these decisions are left to local authorities (e.g. states). This creates an externality, as the outbreak does not respect states' boundaries. The externality directly exacerbates the outbreak. Indirectly, it creates a free-rider problem, because local policymakers pass the cost of fighting the outbreak on to other states. A standard system of distortionary taxes and lump-sum transfers can implement the optimal allocation, with higher tax rates required if states behave strategically. A strategic system of taxes and transfers, rewarding states which depress their economies more than average, improves the outcomes by creating a race-to-the-bottom type of response. In a symmetric equilibrium, the optimal tax rate is lower if states behave strategically.
W toku | Work in progress
Winners and losers from reducing global imbalances Przeczytaj streszczenie | Read abstract
We analyze the welfare effects of various policies aimed at global rebalancing --- the elimination of persistent current account surpluses and deficits, and/or elimination of large positive and negative net foreign asset positions. Specifically, we study how these policies will affect the welfare of different groups of households, as well as overall wealth inequality within both debtor and creditor countries. We use a two-country version of a workhorse heterogeneous agents framework of Aiyagari (1994), calibrated to the U.S. (largest debtor) and a composite of its trading partners, the Rest of the World (ROW). Our results show that, relative to full financial integration, policies that reduce global imbalances via an increase in U.S. savings rates will lower global interest rates, increase capital-output ratio and total output in both countries. They will improve welfare of the poorest households and reduce wealth inequality in both countries. Conversely, policies that operate via a decrease in ROW's savings will raise global interest rates, reduce the capital-output ratio and total output in both countries. The rise in interest rates will reduce the welfare of the poor households, even though the overall wealth inequality will decline.
Real Exchange Rate Risk and FDI flows: stylized facts and theory Przeczytaj streszczenie | Read abstract
We document a robust negative relationship between bilateral RER volatility and bilateral FDI flows in the European Union. We then extend the standard international business cycle model to allow for domestic and foreign ownership of physical capital stock to be less than perfect substitutes. This allows the model to have meaningful predictions about the behavior of gross FDI flows. We characterize the conditions under which lower RER volatility coincides with larger bilateral FDI flows. We also show, both theoretically, and using numerical simulations, that the magnitude of the relationship between the RER volatility and FDI flows depends crucially on one parameter: the elasticity of substitution between domestic and foreign ownership of capital stock used in production. Our results suggest the existence of a new channel through which a reduction in RER volatility can be welfare improving: more efficient allocation of capital across countries (capital diversity).
Foreign direct investment over the international business cycle Przeczytaj streszczenie | Read abstract
Among the G7 economies gross foreign direct investment (FDI) positions are very large, averaging 100% of GDP and dwarfing the absolute values of net FDI positions in most countries. Additionally, inward and outward FDI flows exhibit robust, positive correlation over the business cycle. In the standard international business cycle (IBC) model gross FDI stocks and flows are not well defined, and only net flows matter. We extend the standard model by allowing domestic and foreign ownership of physical capital in the aggregate production function to be imperfect substitutes. We estimate that elasticity of substitution using the co-movement of gross FDI flows, and find it to be less than 2.5 – a value much smaller than the implicitly assumed infinity in the IBC literature. Our results uncover a new source of welfare gains from openness to FDI among otherwise identical, developed economies – a capital diversity channel, akin to product variety in trade models. The channel is quantitatively important – openness to FDI yields steady-state welfare gains equivalent to at least a 4-5% increase in life-time consumption.