Introduction

I am an Assistant Professor at the IMFS at Goethe University Frankfurt in cooperation with the Hoover Institution at Stanford University. My research focuses on Dynamic Macroeconomics, Monetary 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. My current research statement can be found here.

Current Projects

A Structural Investigation of Quantitative Easing

[with Felix Strobel, draft currently under major revision] (read more)

Did the measures of unconventional monetary policy conducted during the Great Recession induce real effects? We seek to answer this question by using an estimated medium scale DSGE model featuring a banking sector, financial frictions and the endogenously binding effective lower bound on interest rates (ELB) to decompose the US dynamics. We conclude that from 2009 to 2015 the overall quantitative easing (QE) measures increased output about 0.5 percent. While the effects of measures of liquidity provision were negligible, both the bond and MBS purchases had positive impact on consumption. However, other than the MBS purchases, government bond purchases had negative effects on investment and a negative net contribution to GDP. This can be explained by the fact that, whereas QE stimulates asset prices in the short-run, the persistent reduction of excess spreads can lower banks' net worth, the loan supply, and hence real economic activity in the mid-run. Forecasts suggest that, through the link between banks balance sheet and investment, shutting down the QE program will have a strong recessionary "hangover" effect, leading to a net-decrease in output for the years after the end of QE.

The Great Recession and the Zero Lower Bound

[with Felix Strobel, download latest draft] (read more)

We investigate the drivers of the Great Recession and analyse the effects of interest rate policies in the aftermath of the crisis. For that purpose we estimate a medium-scale DSGE model and use it to decompose the dynamics of the US economy while accounting for an endogenously binding effective lower bound on nominal interest rates (ELB). We find that the Great Recession was caused by an increase in the risk premium, which persisted after the trough and weighed heavily on real activity. Our analysis suggests that the long duration of the effective lower bound was a reaction to the weak economic development as opposed to a commitment by the central bank to actively keep interest rates low. Nonetheless, the sharp cut in the Federal funds rate prior to the ELB period attenuated the fall in output by roughly 1 percent. At the ELB, expansionary forward guidance shocks had a strengthening effect on output and helped to stabilize inflation although the Phillips Curve was rather flat in the last two decades. The cost of the binding ELB was substantial and its presence lowered output by 1.5 percent.

Efficient Solution, Filtering and Estimation of Models with OBCs

[download latest 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 interest rates. I propose a solution method for rational expectations models with OBCs and a Bayesian filter/smoother that, both combined, can be used for quick and accurate Bayesian estimation of large-scale models. The quasi-analytic solution method calculates the endogenous duration at the constraint while avoiding matrix inversions and simulations at runtime for gains in computational speed. The TEnKF (transposed Enseble Kalman Filter) is a hybrid of the particle filter and the Kalman filter that, requiring only a very small number of particles, can be used to approximate the likelihood of nonlinear models with high accuracy. The IPA (iterative path-adjusting transposed-ensemble RTS) smoother adds a smoother and an iterative procedure to filter and can be applied to estimate the state distributions while fully respecting the nonlinearity of potentially high dimensional transition functions. I further propose the massively parallelized combination of different forms of heuristic global optimizers to avoid exploring local maxima of the likelihood function only, and I suggest parallelized, parameter-free techniques for efficient sampling from the posterior distribution. As an example, I use these methods to estimate the simple New Keynesian model.


Working Papers

Monetary Policy and Speculative Stock Markets

[download working paper, code on github ] (read more)

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?

[with Thomas Fischer, download paper] (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.

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.


Work in progress

On the Evolutionary Fitness of Rationality

[ with Cars Hommes, download latest draft, 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 Financial Phillips Curve, Disinflation, and the ZLB

[with Philipp Lieberknecht, draft upon request] (read more)

Is the Phillips curve flat and is the recent phenomena of missing disinflation really a puzzle? We find that both questions can be denied when acknowledging that financial frictions affect marginal costs trough the costs of external finance. While in normal times, the riskless rate and credit spreads level out and real marginal costs dominate the price setting, at the zero lower bound (ZLB) higher spreads can offset the effect of lower real costs. We first show this result analytically in a tractable small closed economy with financial frictions, and then estimate the model at the ZLB. We find the that while the structural New-Keynesian Phillips Curve is well and alive with firms changing prices in average every 2.5 quarters, we provide quantitative evidence that after a strong financial crash inflation can be moderate if the ZLB is binding, leading to the phenomena of a seemingly dead static empirical Phillips Curve.

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.

Noise Induced Stationarity in Explosive Dynamic Feedback Systems

[with Cees Diks, draft upon request] (read more)

We show that under certain circumstances adding noise to an explosive dynamic expectations feedback system can decrease the probability of explosive dynamics and make stationary behavior more likely. We build a small toy model of a market with positive expectations feedback, such as a housing or an asset market, and assume that agents form heterogeneous boundedly rational expectations. Identifying regions in the parameter space where the dynamics are explosive, we give conditions under which adding further stochastic noise can potentially stabilize the market. We provide intuition for this result and discuss the economic implications. For instance, this implies that policy measures that presumingly increase market volatility, such as a Tobin Tax, are not necessarily destabilizing.

Collateral Value and Credit Cycles

[work in progress] (read more)

This work studies the dynamic feedback between collateral prices and aggregate credit volume by formulating a simple non-linear model of a market for a durable good that can be used as collateral to finance expenditures. A finite number of agents that are heterogeneous in wealth maximize utility by deciding over the stock of the good, consumption expenditures and borrowing volumed. We assume that agents form boundedly rational mean-reverting expectations with risk-learning component. The individual borrowing conditions are determined by each agent's leverage ratio and the probability distribution of expected future prices of collateral. The use of projection methods allows agents to realistically anticipate for policy effect and effects of macroprudential regulation even though their expectations are not formed fully rationally. We show that this leads to non-trivial dynamics that are fed by the dynamic feedback of expectations on collateral value, credit and the prices of collateral. Running detailed numerical simulations, we analyze the dynamic stability properties and show how macroprudential policy is able to improve stability properties and decrease the magnitude of unwanted feedback effects.

The General Equilibrium Effects of a Basic Income Guarantee

[work in progress] (read more)

Can a basic income guarantee increase labor market participation rates? I take a simple Walrasian economy with agents heterogeneous in skills as a starting point to compare the macroeconomic equilibrium outcome of a minimum wage and unemployment benefit with that of a basic income guarantee regime. Treating individual labor supply as a binary and using standard preferences, I focus on a labor-intensive real economy that embeds decreasing returns to scale and imperfectly competitive firms. This simple structure allows to study the distribution of employment, consumption and production among agents as well as aggregate measurements. While the introduction of minimum wages and/or unemployment benefit yields textbook results, a moderate basic income guarantee can increase labor market participation and output. The binary nature of employment is crucial to generate this result. I show analytically under which restrictions on the parameter space the above conclusion holds and when it does not. Further, any combination of a basic income guarantee with minimum wages and/or unemployment benefits is harmful for employment and output.

CV

Download CV Download research statement

In brief, 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 microsystems like Matlab and think it is a barrier towards future scientific advancement. Also, as code is getting more and more important, I economists should share code and cooperate 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 contribute (or shoot me a short email).

Macro Puzzles

My packages on :

pynare pydsge econsieve grgrlib

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. 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.

I am coordinating the refactoring of the Macromodelbase 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
boehl [ät] econ [döt] uni-frankfurt [döt] de
mail [ät] gregorboehl [döt] com
Tel
+49 (0)69 798 33831
Mail
Dr. Gregor Boehl
Institute for Monetary and Financial Stability
Goethe-Universität Frankfurt
House of Finance
Theodor-W.-Adorno-Platz 3
60323 Frankfurt am Main
Germany