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.
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.
Estimation of DSGE Models with the Effective Lower Bound
R&R at the Journal of Applied Econometrics
[ current version (05/2022), old WP version, with Felix Strobel, posterior & historic shocks, code ] (read more)
We propose a novel nonlinear Bayesian likelihood approach that accounts for the effective lower bound on nominal interest rates. At its heart stands a nonlinear filter that allows for a fast estimation of high-dimensional data generating processes. Additionally it employs a piece-wise linear solution method, which vastly outperforms existing alternative approaches in terms of speed, and a state-of-the-art sampler. We apply our approach to analyze post-2008 US data and illustrate that the common practice of omitting the ELB period in the estimation severely distorts the analysis of the post-2008 economic dynamics.
Monetary Policy and Speculative Asset Markets
R&R at the European Economic Review
current version (05/2022),
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.
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), 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.
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.
The Empirical Performance of Financial Frictions since 2008
[ current draft (05/2022), with Felix Strobel, posterior & historic shocks, 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, the inclusion of these frictions into the canonical medium-scale DSGE model does not improve the model's ability to explain macroeconomic dynamics in the US in 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 decrease of the credit spread. Hence, the estimated model predicts financial decelerator effects. Associated financial shocks only play 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.
Ensemble MCMC Sampling for DSGE Models
[ current draft (05/2022), code] (read more)
This paper develops an adaptive differential evolution Marcov chain Monte Carlo (ADEMC) sampler, which uses a large number of chains (the "ensemble") that endogenously generate sampling proposals depending on the state of the full ensemble.
The sampler satisfies five requirements, that make it suitable for the estimation of large-scale models with potentially bimodal posterior distributions that are computationally expensive to evaluate:
(i) The number of chains scales one-to-one with the number of ensemble iterations,
(ii) fast convergence to the high density region of the posterior (thereby making posterior mode density optimization unnecessary), and
(iii) good performance for bimodal distributions.
The proposal density (iv) is generated endogenously from the state of the ensemble and
(v) respects the bounds of prior distribution.
Consequently, ADEMC is straightforward to parallelize.
As an application, I estimate a heterogeneous agent New Keynesian (HANK) model
including the micro parameters linked to the stationary distribution of the model.
Hence, this paper is the first to estimate variations to the stationary distribution, allowing for a comprehensive analysis of heterogeneous agent models.
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 general equilibrium 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 genreal equilibrium, the associated relative increase in banks' liquidity risk can move deposit rates -- and hence, household spending -- in either direction. The overall effect on inflation remains ambiguous because decreasing lending rates 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.
(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 ]
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.
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.
My packages on :
emcwrap grgrlib pynare
These packages are also on PyPI and can be installed via `pip`. 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. econpizza is a generic nonlinear solver for general equilibrium models, including heterogenous agent models (and including model parsing). It uses an alternative shooting algoritm that is faster and more robust than the extended path method implemented in Dynare. There is also experimental support for heterogeneous agent models. 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 (the package is currently unmaintained).
- This guide by John Cochrane summarizes many useful tips on how to write a paper (and how not to).
- This post by Keith Head gives great advice on how to write an intro.
- The website of Eric Sims provides great course materials on macroeconomics.
- This is another nice collection of guides for early-career researchers.
- This course from Ken Judd and the website of Fabrice Collard have nice material on computational economics.
- If you are looking for implementations of macroeconomic models, the MMB replication archive and the repo of Johannes Pfeifer are a good place to start searching. Some models can also be found in my my *.yaml archive.
- These notes by Jesús Fernández-Villaverde develop the microfoundations of the complete Smets-Wouters-like medium-scale DSGE model.
- 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.
- My recommendation to get started with Python is to install Anaconda together with VSCode and the VSCode extension for Python.
- A nice introduction to Python from QuantEcon. They have great stuff on numerical methods as well.
- Python for matlab users: short vs. long.
- Another, somewhat less nice introduction to Python.
- A good introduction to Git.
- Why matlab may be a barrier to scientific advancement.
- Paul Romer on using Python vs. matlab.
- A comparison of Julia, Python and matlab.
- numba - probably by now the first address to speed up your code.
- chaospy - 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.
mail [ät] gregorboehl [döt] com
gboehl [ät] uni-bonn [döt] de
Dr. Gregor Boehl
Institute for Macroeconomics and Econometrics
University of Bonn