I am a Postdoc at the University of Bonn. My research focuses on Dynamic Macroeconometrics, Monetary Theory, and Inequality with emphasis on structural empirical analysis and heterogeneity. 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.
A Structural Investigation of Quantitative Easing (under review)
[current version, WP version, with Gavin Goy and Felix Strobel, code ] (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 version, WP version, with Felix Strobel, posterior & historic shocks, code ] (read more)
Using a novel nonlinear Bayesian likelihood approach that fully accounts for the lower bound on nominal interest rates, we analyze US post-crisis macroeconomic dynamics and provide reference parameter estimates. We find that despite the attention received in the literature, neither the inclusion of financial frictions nor that of household heterogeneity improves 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. We illustrate that the common practice of omitting the ZLB period in the estimation severely distorts the analysis of the most recent economic dynamics.
Monetary Policy and Speculative Asset Markets (R&R at the European Economic Review)
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.
Efficient Solution and Computation of Models with Occasionally Binding Constraints (under review)
[current version, 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), especially since major developed economies have again hit the zero lower bound on nominal interest rates. This paper shows that a 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.
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.
On the Survival of (Ir)rational Beliefs in a Complex World: A Computational Approach
[current draft, with Cars Hommes, code ] (read more)
Can boundedly rational agents survive in the long run? We develop a novel numerical method to study the interaction of perfectly rational agents with boundedly rational traders in a financial market setup. In our highly nonlinear model, the overall share of each type of agents is endogenous and depends on their market performance. We not only find that boundedly rational agents remain in the market, but document that their effect on price dynamics is even amplified by the behavior of fully rational agents. The interaction of the different agent types can trigger complicated endogenous fluctuations and chaotic dynamics: as rational agents anticipate the beliefs of other market participants, a positive feedback arises which amplifies boundedly rational behavior. Our model simulations fully replicate excessive credit cycles including booms and abrupt crashes without the need for any exogenous fluctuations.
The Hockey Stick Phillips Curve and the Zero Lower Bound
[current draft, with Philipp Lieberknecht, code ] (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.
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]
The Federal Reserve and quantitative easing: A boost for investment, a burden on inflation
[ VoxEU August 2020, with Gavin Goy and Felix Strobel
Solution, Filtering and Estimation of Models with the ZLB
[Methods summary, code ]
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.
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.
My packages on :
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. 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.
mail [ät] gregorboehl [döt] com
gboehl [ät] uni-bonn [döt] de
Dr. Gregor Boehl
University of Bonn