Introduction

I am a Postdoc at the Institute for Macroeconomics and Econometrics of the University of Bonn. Currently, I am directly funded by the German Reserach Foundation (I am the principal investigator of DFG Project 441540692). My research focusses on Dynamic Macroeconometrics, Monetary Theory, and Inequality with emphasis on structural empirical analysis and heterogeneity. I also have a strong background in computational methods and IT. My research statement can be found here.

Publications

A Structural Investigation of Quantitative Easing
Review of Economics and Statistics, forthcoming

[paper, ungated, WP version, with Gavin Goy and Felix Strobel, code] (read more)

We provide evidence that the Federal Reserve's large-scale asset purchases actually reduce inflation. Using nonlinear Bayesian methods that fully account for the binding zero lower bound (ZLB), we estimate a macro-finance DSGE model. Counterfactual analysis suggests that by easing financing conditions, quantitative easing facilitated an increase in aggregate investment. The resulting expansion of firms’ production capacities lowered their marginal costs. These disinflationary supply side effects dominated over the inflationary effects coming from the higher aggregate demand. At the ZLB, the concomitant rise in real interest rates in turn induced a net fall in aggregate consumption.

Monetary Policy and Speculative Asset Markets
European Economic Review, accepted

[current version (05/2022), WP version, code]
(read more)

I study monetary policy in an estimated financial New-Keynesian model extended by behavioral expectation formation in the asset market. Credit frictions create a feedback between asset markets and the macroeconomy, and behaviorally motivated speculation can amplify fundamental swings in asset prices, that potentially cause endogenous, nonfundamental bubbles and bursts. Booms in asset prices improve firms financing conditions and are therefore deflationary. These features significantly improve the power of the model to replicate empirical key moments. A monetary policy that targets asset prices can dampen financial cycles and reduce volatility in asset markets (dampening effect). This comes at the cost of creating an additional channel through which asset price fluctuations transmit to macroeconomic fundamentals (spillover effect). I find that unless financial markets are severely overheated, the undesirable fluctuations in inflation and output caused by the spillover effect more than outweigh the benefits of the dampening effect.


Working Papers

Estimation of DSGE Models with the Effective Lower Bound
R&R at the Journal of Applied Econometrics

[current version (06/2022), old WP version, with Felix Strobel, posterior & historic shocks, code] (read more)

We propose a set of tools for the efficient and robust Bayesian estimation of medium- and large-scale DSGE models while accounting for the effective lower bound on nominal interest rates. We combine a novel nonlinear recursive filter with a computationally efficient piece-wise linear solution method and a state-of-the-art MCMC sampler. The filter allows for fast likelihood approximations, in particular of models with large state spaces. Using artificial data, we demonstrate that our methods accurately capture the true model parameters even with very long lower bound episodes. We apply our approach to analyze post-2008 US business cycle properties.

Efficient Solution and Computation of Models with Occasionally Binding Constraints
R&R at the Journal of Economic Dynamics and Control

[current version (01/2022), WP version, code] (read more)

Structural macroeconometric analysis and new HANK-type models with extremely high dimensionality require fast and robust methods to efficiently deal with occasionally binding constraints (OBCs). This paper shows that the solution to a piecewise linear dynamic rational expectations system with OBCs, depending on the expected duration of the constraint, can be represented in closed form. Combined with a set of simple equilibrium conditions, this can be exploited to avoid matrix inversions and simulations at runtime for significant gains in computational speed. An efficient implementation is provided in Python programming language. Benchmarking results show that for medium-scale models with an OBC, more than 150,000 state vectors can be evaluated per second. This is an improvement of more than three orders of magnitude over existing alternatives. Even state evaluations of large HANK-type models with almost 1000 endogenous variables require only 0.1 ms.

The Empirical Performance of the Financial Accelerator since 2008 (under review)

[current version (07/2022), with Felix Strobel, code] (read more)

We use nonlinear Bayesian methods to evaluate the performance of financial frictions á la Bernanke et al. (1999) during and after the Global Financial Crisis. We find that, despite the attention received in the literature, including these frictions in the canonical medium-scale DSGE model does not improve the model's ability to explain macroeconomic dynamics in the US during the Great Recession. The reason is that in the estimated model with financial frictions, the firms' leverage declines in response to the post-2008 collapse of investment, which in turn implies a narrowing of the credit spread. Hence, the estimated model predicts financial decelerator effects. Associated financial shocks play only a minor role for macroeconomic dynamics. Our estimates account for the binding effective lower bound on nominal interest rates, and confirm our findings independently for US and euro area data.

Rational vs. Irrational Beliefs in a Complex World (under review)

[current version (03/2022), WP version, with Cars Hommes, code] (read more)

Can boundedly rational agents survive competition with fully rational agents? We develop a highly nonlinear heterogeneous agents model with rational forward looking versus boundedly rational backward looking agents and evolving market shares depending on their relative performance. Our novel numerical solution method detects equilibrium paths characterized by complex bubble and crash dynamics. Boundedly rational trend-extrapolators amplify small deviations from fundamentals, while rational agents anticipate market crashes after large bubbles and drive prices back close to fundamental value. Overall rational and non-rational beliefs co-evolve over time, with time-varying impact, and their interaction produces complex endogenous bubble and crashes, without any exogenous shocks.

The Hockey Stick Phillips Curve and the Zero Lower Bound (under review)

[current version (05/2022), WP version, with Philipp Lieberknecht, code] (read more)

We show that the interplay between a binding effective lower bound (ELB) and the costs of external financing weakens the disinflationary effect of financial shocks. In normal times, factor costs dominate firms' marginal costs and hence inflation; credit spreads and the nominal interest rate, which together constitute external financing costs, balance out. When nominal rates are constrained by the ELB, larger spreads can in parts offset the effect of lower factor costs on firms' price setting. The Phillips curve is hence flat at the ELB, but features a positive slope in normal times and thus an overall hockey stick shape. This mechanism also weakens the effects of forward guidance on inflation, since such policy reduces spreads and thereby financing costs.

Can Taxation Predict US-Top-Wealth Share Dynamics?

[current version, WP version, with Thomas Fischer] (read more)

We show that the degree of capital gains taxation can retrace the dynamics of wealth inequality in the US since the 1920s. Precisely matching up- and downturns and levels of top shares, it has high overall explanatory power. This result is drawn from an estimated and micro-founded portfolio-choice model where idiosyncratic return risk and disagreement in expectations on asset returns generate an analytically tractable fat-tailed Pareto distribution for the top-wealthy. This allows us to decompose the sample into periods of transient and stationary wealth concentration. The model generates good out-of-sample forecasts. As an addition we predict the future evolution of inequality for different tax regimes.


Current Projects

Ensemble MCMC Sampling for DSGE Models

[current draft (05/2022), code] (read more)

This paper develops an adaptive differential evolution Markov chain Monte Carlo (ADEMC) sampler. The sampler satisfies five requirements that make it suitable especially for the estimation of models with high-dimensional posterior distributions and which are computationally expensive to evaluate: (i) A large number of chains (the "ensemble") where the number of chains scales inversely (nearly one-to-one) with the number of necessary ensemble iterations until convergence, (ii) fast burn-in and convergence (thereby superseding the need for numerical optimization), (iii) good performance for bimodal distributions, (iv) an endogenous proposal density generated from the state of the full ensemble, which (v) respects the bounds of prior distribution. Consequently, ADEMC is straightforward to parallelize. I use the sampler to estimate a heterogeneous agent New Keynesian (HANK) model including the micro parameters linked to the stationary distribution of the model.

Endogenous Money, Excess Reserves and Unconventional Monetary Policy

[current draft (03/2022), code] (read more)

Despite massive holdings of excess reserves in the European banking sector and policy rates below zero, interest rates on households' deposits remained elevated long after 2009 and inflation remained subdue. Using an industrial organization model of the banking sector, I show that the effects of unconventional monetary policy can be ambiguous. In the model, loans create deposits, but holding more deposits is associated with higher liquidity risk. Asset purchases create additional reserves which are effective to cut lending rates, thereby stimulating lending but creating additional deposits. In general equilibrium, the associated relative increase in banks' liquidity risk can move deposit rates -- and hence, household spending -- in either direction. At the firms' side, the inflation effect remains unclear because decreasing lending rates may ease firms financing costs. To quantify these channels, I embed this model into a medium-scale DSGE model which is estimated using nonlinear Bayesian methods. Counterfactual analysis amounts the effects of the ECBs post-2010 unconventional monetary policy measures to 0.25 percent of quarterly GDP, and their effect on inflation to be negligible.

Econpizza: Solving Nonlinear Heterogenous Agent Models Using Machine Learning Techniques

[automated draft (now), code] (read more)

Econpizza is a framework to solve and simulate nonlinear perfect foresight models, with or without heterogeneous agents. A parser allows to express economic models in a simple, high-level fashion as yaml-files. Additionally, generic and robust routines for steady state search are provided.

(Unconventional) Fiscal Policy at the ELB

[work in progress, with Ralph Luetticke] (read more)

We document that the effects of the zero lower bound on nominal interest rates (ZLB) on inequality dynamics can be decomposed in two channels: (i) the real rate channel compounds the effects of a recessionary shock on inequality while (ii) the liquidity premium channel compresses the spread between liquid and illiquid assets, therby reducing inequality. We find that the real rate channel dominates for income inequality whereas wealth inequality is driven by the liquidity premium channel. Large-scale asset purchases (LSAPs) and helicopter money drops (HDs) are moderately effective in stimulating the economy. Their effects are greatly amplified by the duration for which the ZLB is expected to bind. HDs are always egalitarian. For LSAPs, short ZLB durations cause a hike in consumption inequality and a longer binding ZLB causes wealth inequality to increase.

The Quantitative Effects of Taxation on Inequality Dynamics

[work in progress] (read more)

We use a novel identification strategy of functional-coefficient structural inference to estimate the relationship between different forms of taxation and the concentration of income and wealth. We find that overall, the degree of taxation has a very high explanatory power on the dynamics of top shares, in particular so the series of income taxes. This regularity holds for the US, UK, France and Sweden. We estimate that an 1 percent increase of taxation reduces the concentration of wealth in the long run by approximately 0.5 percent and concentration of income by 0.25 percent. This effect is more emphasized in the US and less so for Sweden.

Helicopter Money and the Cross-Section of Households

[with Keith Kuester, work in progress ]

Low nominal rates and the saver: The dark side of lower(ing) interest rates

[with Pablo Guerrón-Quintana and Keith Kuester, work in progress ]


Policy, Media and Other Work

The Federal Reserve and quantitative easing: A boost for investment, a burden on inflation

[ VoxEU August 2020, with Gavin Goy and Felix Strobel]

The ETACE Virtual Appliance: An Exploratory for the Eurace@Unibi model

[with Sander van der Hoog, download paper, download software] (read more)

This paper presents the Etace Virtual Appliance. The purpose of the software package is, among others, to provide researchers the possibility to explore the dynamics of the Eurace@Unibi agent-based macroeconomic model and to encourage the reproducibility and transparency of research. The package contains various components that allow the user to initialize, simulate and analyze the model. We also give a short overview of what can be done with the Etace Virtual appliance.


CV

Download CV Download research statement

In brief, my current position is fully funded by the German Reserach Foundation (DFG) for my reserach project on nonlinear Bayesian estimations. With the OSE initiative I also successfully raised funding for teaching and research infrastructure. Prior to joining the University of Bonn I spent two years as a Postdoc at the IMFS at Goethe University Frankfurt in cooperation with the Hoover Institution at Stanford University (longer-term visits in Stanford in 2018 and 2019). I completed my PhD at the University of Amsterdam and Bielefeld University, supervised jointly by Cars Hommes and Herbert Dawid. I won the 2017 Student Price of the Society for Computational Economics. During my PhD I was financed by scholarships from the Bielefeld Graduate School in Economics and the DFG. I obtained my MSc in economics from the University of Granada (top of class) and studied economics at Humboldt University Berlin at undergraduate level. I have worked as a professional guitar player and as an IT consultant for several start-up companies.

Code

I am an enthusiast user of Arch Linux and Python. For many reasons I support the use of free and open source software in science. As such, I think that the access to software must be unrestrained by expensive and restrictive licenses. Implementations should be tractable, and libraries easily extensible. Openness is a booster for performance and flexibility. I am in particular sceptical towards closed ecosystems like matlab and think it is a barrier towards future scientific advancement. See the collection of links below for some references on this issue. As code is getting more and more important, I advertise code code sharing and cooperation on new implementations. To that end I encourage the use of style guides (they can also be automatized) and version control systems. Most of my codes can be found in my repositories on github .

My packages on :

pydsge econpizza econsieve
emcwrap grgrlib pynare

econpizza is a generic nonlinear solver for general equilibrium models, including heterogenous agent models (and including exressing and parsing models). It uses an alternative shooting algoritm that is faster and more robust than the extended path method implemented in Dynare. Example heterogenous agents models (and representative agent models) are provided. The package is documented in this draft.

pydsge is a Python based solution and simulation toolbox, specifically targeted to provide tools for nonlinear filtering and estimation of models with occasionally binding constraints. Its back-end for nonlinear filtering is econsieve, a hybrid between the Particle filter and the Kalman filter. Both packages are explained in the respective method paper above.

These packages are also on PyPI and can be installed via `pip`.

From 2017 to 2020 I was coordinating the refactoring of the Macroeconomic Model Database (MMB) to meet modern standards and to become independent of proprietary software.

Useful Stuff

I maintain a compilation of unsolved problems in macroeconomics, please be invited to browse or contribute (or shoot me a short email).

Macro Puzzles

Some useful econ-related links: On econometrics:
  • This interactive online textbook (by Roger Labbe) gives an excellent and hands-on introduction into Bayesian filtering.
  • This post explains very nicely how the Hamiltonian Monte Carlo (HMC) Sampler works and, en passant, shows why using Metropolis Hastings might not be a good idea for many problems in practice. Note that HMC is also behind the NUTS sampler used in Stan (a widely used sampling package), but not very feasible for many applications in structural (macro-)econometrics. The reason is that HMC requires the evaluation of the gradient at each draw, which is relatively costly for most of our likelihood functions. Have a look at emcee below if you are looking for a powerful multi-purpose sampler.
On programming: Some handy Python packages:
  • numba - probably by now the first address to speed up your code.
  • jax - emerging to be the new numba. Different philosophy featuring automatic differenciation (developed by google).
  • emcee provides very powerful and easily paralellizable MCMC sampler.
  • chaospy - for quasi-random numbers and uncertainty quantification.
  • filterpy (by Roger Labbe, see above) is a collection of linear and nonlinear Bayesian filters.
  • dolo (by Pablo Winant) is a powerful collection of many tools to solve and run (macro) economic models.
  • interpolation.py (also by Pablo Winant) provides fast-as-light interpolation tools.

Contact

Email
mail [ät] gregorboehl [döt] com
gboehl [ät] uni-bonn [döt] de
Mail
Dr. Gregor Boehl
Institute for Macroeconomics and Econometrics
University of Bonn
Adenauerallee 24-42
53113 Bonn
Germany