Browsing by Subject "On-the-job search"

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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.