Introduction

I am a Postdoc at the University of Bonn. My research focuses on Dynamic Macroeconomics, Monetary and Fiscal Theory, and Inequality with emphasis on structural empirical analysis, heterogeneity and endogenous nonlinear dynamics. I also have a strong background in IT and computational methods and am advocating free and open source software jointly with the OSE initiative. My current research statement can be found here.

Working Papers

A Structural Investigation of Quantitative Easing (under review)

[current draft, WP version, with Gavin Goy and Felix Strobel ] (read more)

Did the Federal Reserves' Quantitative Easing (QE) in the aftermath of the financial crisis have macroeconomic effects? To answer this question, we estimate a large-scale DSGE model over the sample from 1998 to 2020, including data of the Fed's balance sheet. We allow for QE to affect the economy via multiple channels that arise from several financial frictions. Our nonlinear Bayesian likelihood approach fully accounts for the zero lower bound on nominal interest rates. We find that between 2009 to 2015, QE increased output by about 1.2 percent. This reflects a net increase in investment of nearly 9 percent, that was accompanied by a 0.7 percent drop in aggregate consumption. Both, government bond and capital asset purchases were effective in improving financing conditions. Especially capital asset purchases significantly facilitated new investment and increased the production capacity. Against the backdrop of a fall in consumption, supply side effects dominated which led to a mild disinflationary effect of about 0.25 percent annually.

US Business Cycle Dynamics at the Zero Lower Bound (under review)

[current draft, WP version, with Felix Strobel, download smoothened shocks] (read more)

Using a nonlinear Bayesian likelihood approach that fully accounts for the zero lower bound on nominal interest rates, we analyze US post-crisis business cycle dynamics and provide reference parameter estimates. Contradicting the gist of the literature, we find that neither the inclusion of financial frictions nor that of household heterogeneity improve the empirical fit of the standard model, or its ability to provide a joint explanation for the post-2007 dynamics. Associated financial shocks mis-predict an increase in consumption. The common practice of omitting the ZLB period in the estimation severely distorts the analysis of the more recent economic dynamics.

Monetary Policy and Speculative Asset Markets (under review)

[current draft, old WP version, code on github ]
(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, potentially causing endogenous, nonfundamental bubbles. These features greatly improve the power of the model to replicate empirical-key moments. I find that monetary policy can indeed dampen financial cycles by carefully leaning against asset prices, but at the cost of amplifying their transmission to the macroeconomy, and of causing undesirable responses to movements in fundamentals. %This paper studies a financial New-Keynesian model in which behaviorally motivated speculation can cause endogenous, nonfundamental asset price bubbles. Credit frictions create a feedback between asset markets and the macroeconomy. I find that monetary policy can either mitigate spillovers from the asset market, or dampen nonfundamental fluctuations in asset markets by carefully leaning against asset prices. %A stronger policy response further stabilizes asset markets but intensifies spillover effects and causes undesirable responses to non-financial shocks. %I estimate the model and show that by allowing for behavioral expectation formation in the asset market, the power of the model to replicate empirical key moments improves greatly. %This paper studies a financial New-Keynesian model in which behaviorally motivated speculation can cause endogenous, nonfundamental asset price bubbles. Credit frictions cause a feedback between asset markets and the macroeconomy. I find that monetary policy can either mitigate spillovers from the asset market, or it can dampen nonfundamental fluctuations in asset markets by carefully leaning against asset prices. While a stronger policy response can further stabilize asset markets, it intensifies spillover effects and also causes undesirable responses to non-financial shocks. I estimate the model and show that by allowing for behavioral expectation formation in the asset market, the power of the model to replicate empirical key moments improves greatly. %This paper studies a financial New-Keynesian model in which behaviorally motivated speculation in the asset markets can cause endogenous, nonfundamental asset price bubbles. %Credit frictions causes feedback between asset markets and the macroeconomy. %Monetary policy can either dampen nonfundamental fluctuations in asset markets or can mitigate these spillovers by carefully leaning against asset prices. While a stronger policy response can further stabilze asset markets, it intensifies spillovers effect and cause undesirable responses to non-financial shocks. %I estimate the model and show that by allowing for behavioral expectation formation in the asset market, the power of the model replicate empirical key moments improves greatly. %This paper shows that in a model with credit frictions, behaviorally motivated speculation in the asset markets can cause endogenous, nonfundamental asset price bubbles %that spill-over to the macroeconomy. %Monetary policy can either dampen nonfundamental fluctuations asset markets or can mitigate these spillovers by carefully leaning against asset prices. While a stronger policy response can further stabilze asset markets it intensifies spillovers effect and cause undesirable responses to non-financial shocks. %I estimate the model and show that by allowing for behavioral expectation formation in the asset market, the power of the model replicate empirical key moments improves greatly. %In a model with credit frictions and endogenous, nonfundamental asset price bubbles, %I show that monetary policy can either ``lean agaist the wind'' and stabilize asset markets, or can mitigate spillovers to the real economy. %The dampening effect of this policy is limited due to its undesirable response to non-financial shocks. %I estimate the model and show that by allowing for behavioral expectation formation in the asset market, the power of the model replicate empirical key moments improves. %Using an estimated model with credit constraints in which excess volatility of stock markets is endogenously amplified through behavioral speculation, I study whether monetary policy can mitigate spillovers. Endogenous speculation and its feedback to the price level are central features to replicate empirical key moments. Standard monetary policy rules are shown to amplify stock price volatility. Numerical analysis suggests that asset price targeting can offset the impact of speculation on either output or inflation (but not on both) and can dampen excess volatility. The dampening effect of this policy is limited due to its undesirable response to non-financial shocks.

Can Taxation Predict US-Top-Wealth Share Dynamics?

[current draft, 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

The Hockey Stick Phillips Curve and the Zero Lower Bound

[current draft, with Philipp Lieberknecht, code on github ] (read more)

We argue that the recent observed disconnect between inflation and economic activity can be explained by the interplay between the zero lower bound (ZLB) and the costs of external financing. In normal times, variations in the credit spreads and the safe interest rate balance out and costs for employing production factors dictate firms' marginal costs and their price setting. However, at the ZLB the safe interest rate is constrained and higher spreads can more than offset the effect of lower production factor costs. As a consequence, financial shocks at the ZLB induce only moderate inflation responses. The resulting Phillips curve features a hockey stick shape: it exhibits the usual positive slope away from the ZLB but flattens considerably for negative output gaps at the ZLB. Short-lived forward guidance shocks may induce weak inflationary or even deflationary effects via the same mechanism, thereby attenuating the forward guidance puzzle.

Efficient Solution, Filtering and Estimation of Models with OBCs

[current draft, code on github ] (read more)

Occasionally binding constraints (OBCs) play a central role in macroeconomic modelling since major developed economies have hit the zero lower bound (ZLB) on nominal interest rates. I present a quasi-analytic solution method for rational expectations models with OBCs. This method avoids matrix inversions and simulations at runtime for gains in computational speed. Combined with a Bayesian filter, be used for fast and accurate Bayesian estimation of large-scale models featuring an OBC.

On the Evolutionary Fitness of Rationality

[current draft, with Cars Hommes, code upon request] (read more)

This work analyses the interaction of perfectly rational agents in a market with coexisting boundedly rational traders. Whether an individual agent is perfectly rational or boundedly rational is determined endogenously depending on each types market performance. Perfect rationality implies full knowledge of the model including the non-linear switching process itself. Policy function iteration is used to find a recursive minimal state variable solution of the highly nonlinear system and I show that this solution is not necessarily bounded. Depending on the parameterization, agents' interaction can trigger complicated endogenous fluctuations that are well captured by the solution algorithm. In such financial market setup rational agents might adapt sentiment beliefs and so fail to mitigate speculative behavior, and boundedly rational agents are not necessarily driven out of the market. While up to a certain point the presence of fully rational agents tends to have stabilizing effects it may later amplify endogenous fluctuations.

The Quantitative Effects of Taxation on Inequality Dynamics

[draft upon request] (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.

The Macroeconomic Effects of QE in the Euro Area: Evidence from a Structural Estimation

[work in progress, with Gavin Goy]

(draft coming soon)

Other Work

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, I spent two years as a Postdoc at the IMFS at Goethe University Frankfurt in cooperation with the Hoover Institution at Stanford University. During this time, I visited Stanford twice during the winter 2018/19 and 2019/20. Before that, 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 a scholarship from the Bielefeld Graduate School in Economics and Management. Before, I was holding a scholarship from the German Research Foundation. 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. 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 even be automatized!) and version control systems. Most of my codes can be found in my repositories on github .

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

Macro Puzzles

My packages on :

pydsge econsieve grgrlib pynare

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 backend 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. pynare is a Python wrapper of Dynare that also provides access to its workspace. Its declared goal is to allow working with Dynare from within Python without having to lay hands on Matlab/Octave.

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.

During my time at Bielefeld University I created the ETACE Virtual Appliance (jointly with P. Harting and S. van der Hoog). Here is the installation guide, a user manual and a licenses file.

Download ETACE-VA

Contact

Email
mail [ät] gregorboehl [döt] com
gboehl [ät] uni-bonn [döt] de