Browsing by Subject "Inflation"

Now showing 1 - 14 of 14

The Argentine Recovery: some features and challenges
(2007-02) Mercado, P. Ruben
Argentina experienced moderate growth rates during the import substitution industrialization strategy, an “inward looking” development strategy roughly lasting from the 1930s to the 1980s and characterized by the promotion of local industries oriented toward the domestic market. However, that growth came along with increasing volatility in GDP growth and growing and increasingly volatile levels of inflation. The source of this volatility has been attributed either to exogenous shocks or to endogenous causes, particularly to macroeconomic mismanagement (see Mercado 2001).
Aspects of inflationary cosmology
(2016-05) Lorshbough, Dustin Eldon; Paban, Sonia; Distler, Jacques; Fischler, Willy; Kaplunovsky, Vadim; Pavlovic, Natasa
We discuss aspects of excited initial states in inflationary cosmology. We review the basic framework of inflationary cosmology and how to compute observable correlation functions. The framework of excited initial states is introduced and the corrections to the cosmological parameters are computed. We show that if the observable modes in the cosmic microwave background are excited, the amplitude of excitation is strongly bounded. We discuss equation of state parameter transitions as a physical mechanism for generating excited initial states. We describe how to interpret the bounds on excitation amplitude as bounds on the parameters of the transition.
Essays in empirical macroeconomics
(2022-06-15) Kim, Gwangmin; Coibion, Olivier; Eusepi, Stefano; Bhattarai, Saroj; Glover, Andy
This dissertation is going to empirically study household inflation expectations and inflation. Inflation expectations and inflation play a central role in economic dynamics. For example, when households expect future price increases, households will try to purchase goods now than later at higher prices which is eventually going to push prices even higher. Chapter 1 contributes to the literature on inflation expectations by showing a channel that can significantly bias the central banks' aggregate inflation expectations measures. This chapter is joint work with Carola Binder. We show that when inflation expectations surveys rely on repeat survey participants, survey participation itself may affect future responses. Because the central bank's survey asks about future prices and inflation, it prompts information acquisition between survey waves for survey respondents. These "Learning-through-Survey" effects are particularly large for household inflation expectations. For example, after participating twelve consecutive times in the SCE, respondents end up with a 2.6 percentage point lower inflation forecast and 34% lower inflation uncertainty on average than in the first interview, with most of the decline happening in the first two months of participation. Consequently, repeat participants may be more informed, and not be representative of the broader population of the economy. Chapter 2 estimates three components of household inflation expectations of the SCE using a dynamic factor model: Common, Learning, and Long-run factor. Using the estimated common inflation expectation factor shared by all survey participants, I recover the household inflation expectations less the learning effect of the SCE without discarding repeat survey participants' data which could have been wasteful otherwise. It successfully corrects for the bias due to the learning effects of repeat survey participants and is significantly less noisy than the raw data. In addition, the estimated learning factor and long-run factor of inflation expectations suggest that inflation expectations of households are largely influenced by news coverage on inflation and oil prices. Finally, Chapter 3 studies the product life cycle effects on prices and inflation inequality in the U.S. The annual inflation rate of lower-income households has been higher than that of higher-income households in general, a finding termed in extensive literature as "inflation inequality." Using barcode-level retail sales data and household spending data in the U.S, I show that the product life cycle channel can account for a significant portion of this inflation inequality among households. The prices of new products are initially high but steadily decrease after then as it goes out of fashion. Because rich households tend to be early adopters preferring new goods to old goods, those rich early adopters experience a sharp price decrease or lower inflation than poor late-adopters who buy goods when the price decreasing phase has stopped or got less steep.
Essays in macroeconomics
(2024-05) Herriford, Trenton; Mueller, Andreas I., 1979-; Andres Drenik; Brent Bundick; Stefano Eusepi
This dissertation consists of three independent chapters, spanning several subfields within macroeconomics. Chapter 1 explores the connection between workers' search for new jobs and their wage expectations. In standard models, workers' expectations about their future real wages determine how much they search for new jobs. But using a panel survey, I show that predicted job search doubles for individuals who expect nominal-wage cuts—even after controlling for their expected real wages. I then develop a search-and-matching model with on-the-job search. The model's main feature is a dynamic game of search and wage setting between matched workers and firms. Adding behavioral worker preferences to the model reproduces the sharp increase in search when workers expect wage cuts, and this mechanism endogenously generates downward nominal wage rigidity. When I calibrate the model to match workers’ job-search response to expecting wage cuts, I find this behavior can explain 2/3 of observed wage freezes. Chapter 2 examines the macroeconomic effects of data releases. Existing research finds that a macroeconomic indicator's first released/announced estimate has effects independent of the indicator’s actual value. However, I find observations from the Great Inflation drive these results, and this finding is especially pronounced for inflation announcements. Specifically, announcing last quarter’s inflation was one percentage point higher than its actual value increased prices two percent over the subsequent year during the Great Inflation—but had no significant effects in the time after. I show this can theoretically be explained by data releases causing self-fulfilling fluctuations, a possibility predicted by the New Keynesian model when I add to it information frictions and when monetary policy does not sufficiently respond to economic conditions. I then calibrate a quantitative New Keynesian model and find nearly all the price response to inflation announcements can indeed be explained by this self-fulfilling mechanism, as opposed to standard effects implied by imperfect information. Chapter 3, which is joint with Brent Bundick and A. Lee Smith, studies the transmission of Federal Reserve communication to financial markets and the economy using new measures of the term structure of policy rate uncertainty. Movements in the term structure of interest rate uncertainty around Federal Open Market Committee (FOMC) announcements cannot be summarized by a single measure but, instead, are two dimensional. We characterize these two dimensions as the level and slope factors of the term structure of interest rate uncertainty. These two monetary policy uncertainty factors significantly help to explain changes in Treasury yields and forward real interest rates around FOMC announcements, even after accounting for changes in the expected path of policy rates. Moreover, we demonstrate that focusing in just a single dimension of monetary policy uncertainty provides an inaccurate description of how policy uncertainty shapes the transmission of FOMC announcements. Finally, our policy uncertainty factors provide stronger first-stage instruments in a proxy structural vector autoregression setting, which implies more expansionary macroeconomic effects of forward guidance than those estimated only using the expected path of policy rates.
Essays on inflation expectations and information frictions
(2018-04-26) Ryngaert, Jane Maria; Coibion, Olivier; Bhattarai, Saroj; Boehm, Christoph; Sinclair, Tara
This dissertation empirically investigates the expectations formation process and the constraints that economic agents face in forming beliefs about macroeconomic variables. Chapter 1 contributes to and extends our current understanding of information frictions in expectations. I first propose a new framework for estimating noisy information using individual forecasts, rather than mean forecasts as commonly done in previous work. This approach provides more power for identifying underlying information rigidities. I further extend this framework to incorporate misperceptions on the part of economic agents about the persistence of the underlying process being forecasted. Applying this framework to the U.S. inflation forecasts of professional forecasters points toward significantly less noisy information than previous estimates suggest but reveals a systematic underestimation on the part of forecasters of the persistence of inflation. Using a structural model that incorporates both noisy signals and misperceptions of persistence, I quantify the relative importance of each channel in accounting for the expectations formation process of these agents. The results indicate that, even for professional forecasters, there are multiple forces that generate economically significant deviations from full information. Chapter 2 is joint work with Olivier Coibion, Yuriy Gorodnichenko, and Saten Kumar. Using novel survey questions on the higher-order expectations of firm managers, we study the formation and evolution of these beliefs. A unique experimental approach allows us to characterize the degree of higher-order thinking of economic agents and how this degree of higher-order thinking affects managers' expectations as well as their economic decisions. We then relate these results to macroeconomic models in which higher order thinking matters for dynamics. Chapter 3 is develops a method for measuring the information flow of economic agents at a given point in time using survey data. I document a reduction in attention to several macroeconomic variables over time. I further document that in periods in which agents are paying more attention to a specific variable, there is also greater cross-sectional dispersion in attention across agents.
Essays on monetary economics and central banking
(2011-08) Ikizler, Devrim; Stinchcombe, Maxwell; Corbae, Dean; Wiseman, Thomas E.; Kuruscu, Burhanettin; Almazan, Andres
In the first chapter, I analyze the US banking industry in order to explain two facts. First, larger banks have lower but less volatile returns on loans compared to smaller banks over the years. Second, larger borrowers have better financial records, i.e. verifiable "hard" information, and they are more likely to match with larger banks, as documented by Berger et al.(2005). I show that these two facts can be explained using a segmented loan markets model with loan contracts between banks and borrowers. Moreover, I show that the difference between the banks returns is not due to diversification advantage of larger banks. Instead, it is because of the fact that larger banks can operate in both large and small loan markets, whereas small banks can only operate in small loans market. Therefore large banks are able to match with larger and less risky borrowers more frequently, which are less likely to default. Moreover, I take the model to infinite horizon allowing bank size to be endogenous to answer multiple policy questions about the future of small business finance and consolidation. I use the data set from the Consolidated Reports of Condition and Income provided by FDIC for 1984-2010 to motivate our research question and to estimate the model. My second chapter revisits the welfare cost of anticipated inflation in an incomplete markets environment where agents can substitute time for money by increasing their shopping frequency. Shopping activity provides an insurance channel to individuals against changes in the return on nominal balances through inflation as documented by Aguiar and Hurst (2007) and McKenzie and Schargrodsky (2011). In my model economy, a higher level of inflation affects people through two channels. First, it distorts the portfolio decision between real and nominal balances, second it redistributes wealth from those who hold more money to those who hold less. People, on average, respond to a higher level of inflation by increasing their price search activity, as they relative return on nominal balances goes down. I find that a 5 percent increase in inflation causes the welfare level go down by 2 percent if people are allowed to substitute time for money, and by 10 percent if we take this channel away from the model. Finally, in the third chapter, I compare the indirect measure of inflation expectations derived by Ireland (1996b) to the direct measures obtained from expectations surveys in multiple countries. Our results show that the inflation bounds calculated for US and UK data are more volatile than survey results, and are too narrow to contain them due to low standard errors in consumption growth series stemming from high persistence. For Chilean and Turkish cases, however, computed bound for inflation expectations seems to fit the survey results better. Out of three different surveys on inflation expectations in Turkey compared with the bounds computed using Turkish data, expectations obtained by the Consumer Tendency Survey fall within these bounds throughout the whole sample period. The success in the Turkish and Chilean cases can be attributed to the fact that volatility in the consumption series, whereas the failure in US and UK cases are most probably stemming from the fact that the current theoretical model is missing a risk-premium component.
Gardening the landscape and bushwhacking through the swampland : exploring the consequences of quantum gravity for cosmic inflation
(2022-02-07) Rosati, Robert James; Paban, Sonia; Distler, Jacques; Kilic, Can; Boylan-Kolchin, Michael
This dissertation consists of five chapters. The first broadly and briefly orients the reader through an introduction to inflationary cosmology, and why we might expect multi-field inflation to take place. The next four chapters correspond to distinct lines of research conducted during my time as a graduate student. Chapter two is based on work conducted with my advisor Sonia Paban, studying the landscape of possible multi-field inflationary models through a random-matrix generated potential [1]. Chapter three is based on work with Diederik Roest and Perseas Christodoulidis, studying universality and prior dependence in multi-field inflation [2]. Chapters four and five are based on work with Sonia Paban and Vikas Aragam, studying inflation in potentials compatible with quantum gravity and rapidly turning trajectories [3, 4].
Inflation : connecting theory to observation
(2012-08) Meyers, Joel Ray, 1983-; Weinberg, Steven, 1933-; Distler, Jacques; Fischler, Willy; Komatsu, Eiichiro; Paban, Sonia
The inflationary paradigm has become widely accepted as an accurate framework in which to describe the physics of the early universe, due both to the conceptual advantages of the idea and the agreement of its predictions with observational data. However, it remains to be determined which of the many detailed theories of inflation correctly describe the universe in which we live. Any such theory faces the challenge of making accurate predictions which agree with observation while also fitting consistently into a theory of high energy physics. Within this challenge there exists the great opportunity to constrain speculative models of fundamental physics. Inflation thereby provides an observational window into theories conventionally thought to be unreachable by experiment. Measurements of anisotropies in the cosmic microwave background radiation and the distribution of large scale structure have proved to be invaluable tools to probe inflation. There has been recent interest in examining the deviations from gaussianity in the statistics of the observed fluctuations. These higher order statistics, if conclusively discovered, stand to teach us a great deal about inflation. Forthcoming data including improved measurements of the cosmic microwave background temperature and polarization will provide additional means to investigate the inflationary era. It is important to understand precisely what impact inflation has had on the universe we observe and thus understand precisely what observation can tell us about inflation and how it may fit into a fundamental theory of physics. We will show the conditions under which the cosmological correlation functions generated during inflation are conserved, and thus identify the conditions which allow us to use observations today to learn about inflation. We first prove a general result which applies only to the leading approximation of the correlation functions, and then we discuss how to treat the additional complications that come with subleading corrections. Next, we will discuss the observational implications of achieving the conditions for conservation for a particular class of inflationary models. Lastly, we discuss one example of how observations can be used to probe non-inflationary physics beyond the standard cosmological model.
Modeling and constraining inflationary and pre-inflationary eras
(2016-08) Aravind, Aditya; Paban, Sonia; Fischler, Willy; Distler, Jacques; Kilic, Can; Shapiro, Paul R
The paradigm of cosmic inflation has had great success in explaining the statistical properties of fluctuations in the Cosmic Microwave Background (CMB). In this dissertation we discuss a few avenues for modeling and constraining the inflationary universe - constraints on excited states of inflationary fluctuations, some aspects of multi-field tunneling and also constraints on and predictions from a specific model of inflation connecting Higgs physics and dark matter. First, we show that in standard single field slow roll inflation, Bogoliubov excitations of the fluctuation spectrum are tightly constrained by observations. These constraints ensure that the squeezed limit non-gaussianity obtained from such excited states cannot be large. They also rule out any significant imprints in the CMB coming from a sudden transition from kinetic energy domination to inflation. We then explore tunneling in the context of field theory, a scenario that has potential relevance to the pre-inflationary universe. We discuss subtleties involved in choosing the trajectory for tunneling out of a metastable vacuum in a multi-field potential. In particular, we use exact solutions and scaling relations to show that tunneling may happen along directions with large barriers, thus making the common intuition coming from quantum mechanical tunneling unreliable in estimating the tunneling trajectory and therefore, the bounce action. We then explore a specific model of inflation that involves the addition of a scalar singlet and fermionic dark matter to the standard Higgs inflation scenario. We show that dark matter constraints and the requirement to support successful inflation significantly constrain the available parameter space for this model. We also find that the model generically predicts a small value of the tensor-to-scalar ratio r, similar to standard Higgs inflation, though it allows for a larger range of values for the scalar spectral tilt nS.
Single field inflation : observables and constraints
(2014-08) Kundu, Sandipan; Fischler, Willy
One of the exciting aspects of cosmology is to understand the period of `cosmic inflation' that powered the epoch of the Big Bang. Inflation has been very successful in explaining several puzzles of the standard big bang scenario. But the most important success of inflation is that it can explain the temperature fluctuations of cosmic microwave background and the large scale structures of the universe. Despite its great success, the details of the physics of inflation are still unknown. A large number of models of inflation successfully explain all the observations making it remarkably hard to distinguish between different models. We explore the possibility of differentiating between different inflationary models by studying two-point and three-point functions of primordial fluctuations produced during inflation. First, we explore possible constraints on the inflationary equation state by considering current measurements of the power spectrum. Next, we explore the possibility of a single field slow-roll inflationary model with general initial state for primordial fluctuations. The two-point and three-point functions of primordial fluctuations are generally computed assuming that the fluctuations are initially in the Bunch-Davies state. However, we show that the constraints on the initial state from observed power spectrum and local bispectrum are relatively weak and for slow-roll inflation a large number of initial states are consistent with the current observations. As the precision of the observations is increasing significantly, we may learn more about the initial state of the fluctuations in the near future. Finally, we explore the consistency relations for the three-point functions, in the squeezed limit, of scalar and tensor perturbations in single-field inflation that in principle can be used to differentiate between single-field and multi-field inflation models. However, for slow-roll inflation, we find that it is possible to violate some of the consistency relations for initial states that are related to the Bunch-Davies state by Bogoliubov transformations and we identify the reason for the violation. Then we discuss the observational implications of this violation.
A TALE OF TWO CENTRAL BANKS: The Importance of Limiting Political Interference with Central Bank Independence
(2023-05) Cozby, Sarah Gleith
Both theory and empirical evidence support the idea that more independent central banks have better economic outcomes. The purpose of this paper, presented in two cases, is to examine attempts to interfere with central bank independence and their impact on inflation, currency valuation, and macroeconomic performance by evaluating the policies of Turkey President Tayyip Erdogan and US President Donald Trump. Both Presidents used rhetoric and power over the appointment of officials to attempt to compromise central bank independence. President Erdogan’s success directly led to economic crises, including severe currency devaluation and hyperinflation. The Senate approval process prevented Trump from appointing loyalists to the Federal Reserve Board, and the economy prospered. However, his rhetoric arguably damaged the bank’s credibility and public perception of its independence. Close analysis and comparison of the two cases and their outcomes, particularly the effects on citizens, highlights the continued importance of protecting the central bank’s ability to make decisions free from short-term political influence.
The inflationary universe: a primordial bridge between fundamental theory and observable phenomena
(2023-12) Aragam, Vikas; Paban, Sonia; Distler, Jacques; Kilic, Can; Boylan-Kolchin, Michael
This dissertation encapsulates three connected projects that I have worked on as a graduate student. I begin with an introduction to the beautiful intersection of fundamental physics and the primordial universe that is inflationary cosmology. I then present the three main chapters of this dissertation. The first explores the possibility of realizing inflation in steep potentials via multi-field dynamics, which draws on motivations from string theory and the Swampland program. The second chapter examines multi-field inflation at a more fundamental level by rigorously constructing the types of solutions we can achieve in models with features expected in UV-complete theories. The last chapter shifts focus to the gravitational wave signatures that multi-field models of inflation exhibit, with special emphasis on the conditions for these signatures to be observable in upcoming gravitational wave observatories.
The unraveling of South Vietnam : inflation, corruption, and the American military presence, 1965-1975
(2016-01-14) Pho, Helen Nguyen; Lawrence, Mark Atwood; Suri, Jeremi; Davis, Janet; Hsu, Madeline; Nguyen, Lien-Hang
This dissertation argues that military and political decisions made by U.S. policymakers to wage war in Vietnam produced economic consequences that severely undermined the entire American objective of preserving an independent, anticommunist South Vietnam. The escalation of war in 1965 ultimately sent over two million Americans to serve in combat or support roles in South Vietnam. The overwhelming presence of Americans, which peaked at over half a million in January 1969, in turn created numerous problems for the urban South Vietnamese population. The extraordinary amount of wealth brought into South Vietnam, including in the form of commodities, foreign aid, and American soldiers’ purchasing power, disrupted South Vietnamese society and economy. Due to high levels of inflation, the sudden influx of American wealth into a small developing country created incentives for South Vietnamese to work for the Americans, who provided better compensation than South Vietnamese employers. Those who worked for the South Vietnamese state in the armed forces and the civil service received fixed incomes and could not keep pace with growing wartime inflation. The inundation of American soldiers and dollars into the country also led to widespread corruption both among Americans and South Vietnamese, which I argue was destructive to state legitimacy in South Vietnam. Oftentimes, South Vietnamese citizens had to make the morally difficult choice to engage in corrupt actions in order to support their families. The American presence thus exacerbated socioeconomic inequality in South Vietnam and contributed to eroding the national morale of those tasked with serving and fighting on behalf of their country.
Understanding the signatures of single-field inflation in cosmological probes
(2013-08) Ganc, Jonathan Gabriel; Paban, Sonia; Komatsu, Eiichiro
I will investigate the primordial squeezed limit bispectrum as produced by inflation in single-field models. Previous results have argued that generically, single-field inflation produces a negligible bispectrum. However, more careful evaluation yields a more ambiguous result. I will discuss an alternate method for calculating the squeezed limit bispectrum for a general single-field inflation model. I will also explore slow-roll inflation with a non-standard initial state, where we find an enhanced squeezed-limit. I will discuss the detectability of such models in various cosmological observables such as the Cosmic Microwave Background (CMB), Large Scale Structure, and mu-distortion of the CMB.