Alisdair McKay @AlisdairMcKay Twitter profile

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Alisdair McKay

@AlisdairMcKay

1 month

I’ve done a big update of my notes on computation for heterogeneous-agent macro. They start with the endogenous grid method and end with by solving a HANK model using sequence space Jacobians. Codes are in Julia.

Heterogeneous agent modeling

alisdairmckay.com

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Alisdair McKay

@AlisdairMcKay

3 months

Rents have been driving inflation recently. @neilmehrotra , @JavierBianchi7 , and I have been thinking about the implications for monetary policy. 1/9

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Alisdair McKay

@AlisdairMcKay

3 years

Forward guidance is a big part of modern monetary policy, but how effective is it? Johannes and I explore this Q in a model of durable consumption subject to fixed costs. FG Is much less powerful than contemp. rates. Short thread 1/n

AEA Journals

@AEAjournals

3 years

Forthcoming in AER: Insights: "Forward Guidance and Durable Goods Demand" by Alisdair McKay and Johannes F. Wieland.

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Alisdair McKay

@AlisdairMcKay

6 months

We also added a chapter on empirical strategies and quantitative macro (ch. 8). Let us know if you have comments.

marina azzimonti

@mazzimon77

6 months

Major update of our PhD Macro book just updated. What's new? - Growth - RBC - Credit Market Frictions - Emerging Markets - Sustainability Download:

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Alisdair McKay

@AlisdairMcKay

3 years

Intertemporal shifting of demand in action. Finally I can write a Covid paper.

Americans Have Too Much Toilet Paper. Finally, Sales Slow.

Sales of toilet tissue are plummeting to below prepandemic levels after a year in which shortages left consumers scrambling for squares.

www.wsj.com

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Alisdair McKay

@AlisdairMcKay

3 months

In our model, the optimal monetary policy is essentially to target non-housing inflation and ignore housing. We show that a policy of targeting CPI inflation generates a large recession with negligible benefits from cooling down demand in the housing market. 5/9

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Alisdair McKay

@AlisdairMcKay

3 years

New definition of “hubris”—starting a research project and labeling files with the month and day but not the YEAR.

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Alisdair McKay

@AlisdairMcKay

4 years

@fatihguvenen @ben_moll @Simon_Mongey Here's my attempt at a Python implementation. The speed will depend on the objective function the user supplies.

GitHub - amckay/TikTak: Python implementation of Guvenen's TikTak optimization routine

Python implementation of Guvenen's TikTak optimization routine - amckay/TikTak

github.com

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Alisdair McKay

@AlisdairMcKay

3 months

We think a better description is that the consumption of housing services is supply determined with rationing occurring through search. Even with sticky rents, the effective price of finding housing services can rise and ration demand. 3/9

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Alisdair McKay

@AlisdairMcKay

2 years

@JonSteinsson It's hard to simultaneously signal an intention to respond aggressively to off-equilibrium inflation without responding strongly in equilibrium. I think this complicates the policy response when the model is telling you to look through inflation.

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Alisdair McKay

@AlisdairMcKay

3 months

The premise of our paper is that the standard New Keynesian model is not appropriate for thinking about housing services. The NK model assumes production is demand determined, but if consumers want more housing, the economy cannot immediately create more of it. 2/9

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Alisdair McKay

@AlisdairMcKay

3 months

Much of the discussion for down weighting the role of shelter inflation has been based on measurement issues. Our model here is not about measurement but rather about the conceptual role of housing rents in the inflation rate targeted by monetary policy. 7/9

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Alisdair McKay

@AlisdairMcKay

3 months

Relatedly, @neilmehrotra and I recently wrote a research note arguing that CPI shelter inflation is likely to prove quite persistent owing to long estimated lags in the reset of contract rents. 9/9

Despite cooling prices for new leases, overall housing inflation could remain elevated into 2025 |...

We find a long lag between new leases and the overall cost of shelter in the consumer price index

www.minneapolisfed.org

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Alisdair McKay

@AlisdairMcKay

3 months

Housing inflation largely reflects a change in the price of a good that has already been produced so the scope for misallocation is much smaller than its CPI weight would imply. 6/9

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Alisdair McKay

@AlisdairMcKay

3 months

Read the paper here: 8/9

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Alisdair McKay

@AlisdairMcKay

3 years

@ProfJAParker @Roberto_M_Billi @leosven It's not just a ZLB issue. See quote from Woodford's 2010 handbook chapter below.

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Alisdair McKay

@AlisdairMcKay

3 months

We consider the optimal monetary policy response to a shock for housing in both a static search model and in a dynamic two-sector New Keynesian model with search frictions in housing. Arguably, the pandemic represented a large increase in demand for housing. 4/9

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Alisdair McKay

@AlisdairMcKay

3 years

A common Q: People finance durables at long-term interest rates so doesn’t FG still work through those rates? Actually no. What matters is the cost of financing today vs tomorrow. If short rates are low, we expect long-rates to rise so financing today is better. n/n

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Alisdair McKay

@AlisdairMcKay

3 years

@BrzozaBrzezina @ecmaEditors @ben_moll @jfwieland1 Yes, there is a theory of the bust as a response to a durables overhang from the boom (others have made this point). The economy will then have a period of low demand and monetary stimulus cushions the fall but elongates the period of low rates.

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Alisdair McKay

@AlisdairMcKay

3 years

Why? Buying a durable good is partly a short-term decision. Do you do it today or tomorrow? The opportunity cost of buying today is the interest between today and tomorrow. This intuition is reflected in the smooth pasting condition for adjustment thresholds. 4/n

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Alisdair McKay

@AlisdairMcKay

3 years

The main figure. x-axis is years until real rates are cut by 1% for 1 quarter. y-axis is effect on current output. The 3-eq model says real rates at all horizons are equally effective. The fixed cost model says FG is much less powerful. 2/n

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Alisdair McKay

@AlisdairMcKay

3 years

Most of the action is from the extensive margin. This figure decomposes the output response into intensive and extensive margin contributions from durables. The extensive margin is much more sensitive to contemporaneous rates than FG. 3/n

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Alisdair McKay

@AlisdairMcKay

4 years

@Simon_Mongey Clearly you need to cite me more!

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Alisdair McKay

@AlisdairMcKay

9 months

@estruby @fatihguvenen This may help for Julia

GitHub - tpapp/MultistartOptimization.jl: Multistart optimization methods in Julia.

Multistart optimization methods in Julia. Contribute to tpapp/MultistartOptimization.jl development by creating an account on GitHub.

github.com

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Alisdair McKay

@AlisdairMcKay

3 months

@GeorgeSelgin The exact driver of the relative price movement isn't crucial. We also do a "catchup" experiment in sec 5 that you might prefer. But to your Q, remote work = home office, etc. See Wieland and Mondragon's paper

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