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Housing Markets and the Heterogeneous Effects of Monetary Policy Across the Euro Area

_Finalist at the 2022 ECB Young Economist Prize_ **Presented at**: Boston University, Collegio Carlo Alberto, Universidad Carlos III de Madrid, IE University, Federal Reserve Board, European Central Bank, Central Bank of Italy, Central Bank of Denmark, Central Bank of the Netherlands, Central Bank of Lithuania, 2021 European Winter Meeting of the Econometric Society, BU-BC Green Line Macro Meeting, Theories and Methods in Macroeconomics, Philadelphia FED Mortgage Market Research Conference

Household Beliefs Across Euro Area Countries During Covid-19

How do households across euro area countries plan their spending during the covid-19 pandemic? Making use of the Consumer Expectation Survey administered by the European Central Bank, we find that current balance sheets positions, as well as expectations about individual and aggregate variables, play an important role in household planned expenditures in durables. Expectations about both house price growth and inflation shape such plans, and these impacts have been changing during the course of the pandemic. An increase in the number of covid-related deaths in the region where households reside sharply decreases their planned expenditures over the following 12 months. Additionally, we uncover significant heterogeneity across education levels, age, and housing tenure.

Future Policy and Information Dissemination: A Natural Language Processing Approach

Which words matter the most in central bank communication? Making use of a rather unique European monetary policy decision setting, we build the first monetary policy dictionary. We train the dictionary on high frequency movements of the stock market around press conferences of the European Central Bank. This allows us to precisely identify which phrases do the market mainly reacts to. We find that phrases such as "Improved economy", "Market development", and "Stability of the euro" are associated with positive returns. On the other hand, phrases such as "Heightened uncertainties" and "Growth of loans" are associated with negative returns.

A New Keynesian Model with a Rigid Housing Market

House price changes are strongly correlated in the data following monetary policy shocks. I build a New Keynesian model of the housing market where households choose the optimal amount of housing and mortgages. To accommodate realistic house price movements, I extend the housing market structure to include search frictions and house price rigidity so that the housing market clears through the relative fraction of successful buyers and sellers each period. I show that the house price momentum does not translate into slow movements of output and therefore it cannot explain the high degree of persistence found in the data following a contractionary monetary shock. I also highlight important redistributional effects between savers and borrowers in the economy. In particular, house price momentum coupled with the loan-to-value constraint forces the indebted households to cut their consumption for several quarters following a contractionary monetary shock.

EC702 (Graduate-level Macroeconomics)

Teaching Assistant for the Ph.D. level Macroeconomics class. Fall 2019, Fall 2018, Fall 2017.

Food Versus Non-Food Consumption Insurance in Uganda

Households’ income fluctuations in poor countries call for risk smoothing mechanisms, yet insurance is always found to be incomplete. We build a two-goods complete markets model, and confirm this result with the UNPS - a new representative Uganda household-level panel data. The empirical evidence suggests that the degree of consumption insurance differs across consumption goods: Households insure food better than other non-durables.