Fireside Chats: Communication and Consumers’ Expectations in the Great Depression. Federal Reserve Bank of Cleveland, Working Paper No. 20-30. Accepted for publication at Review of Economics and Statistics
Work in Progress
Aggregate Implications of Heterogeneous Inflation Expectations: The Role of Individual Experience (with Hiroshi Toma and Esteban Verdugo)
Inflation expectations are heterogeneous and depend on past individual experiences (Malmendier and Nagel (2016), Malmendier (2021a)). We propose a diagnostic expectations-augmented Kalman filter as a way of representing the heterogeneous inflation expectations-formation process. The difference between inflation expectations of two different individuals lies on the different inflation experiences these two individuals have lived through. This is a learning-from-the-past mechanism. We show that such a model can replicate systematic differences across cohorts in the US. We introduce this mechanism into a New Keynesian model to analyze its macroeconomic implications.
Economic Voting and the Room to Maneuver: evidence from a natural historic experiment (with Juan Herreño and Matias Morales)
We test the extent to which local economic voting responds to the government's "room to maneuver" using data from U.S. elections after two historically important events. First, the abandonment of the gold standard by the UK and other countries, which was outside the incumbent's scope of action and deteriorated the economic conditions of export-oriented counties in the United States. Second, the abandonment of the gold standard by the U.S., which was within the government's scope of action and improved the economic conditions of exporting counties. Exploiting cross-sectional variation in pre-existing destination-specific trade exposures, we find responses of local voting of similar magnitudes regardless of incumbents' responsibility over economic outcomes, implying a strong feedback from economic conditions to electoral outcomes, and a weak role for accountability mechanisms in this setting.