Economics PhD @ UT Austin

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A list of all the posts and pages found on the site. For you robots out there is an XML version available for digesting as well.

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Markov Chain Monte Carlo

4 minute read

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Markov Chain Monte Carlo methods are widely used in Bayesian Econometrics. This article aims to clarify their theoretical basis and develop some intuition.

Markov Chains: A Gentle Introduction

5 minute read

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Markov Chains are the very foundation of stochastic processes. And they can open up a whole new way of thinking about problems in stochastic processes once we understand them.

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Bond market response to FOMC communication: Overreaction to Forward Guidance and Diagnostic Expectations

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I document a negative correlation between the response of medium-term (1yr-5yr) treasury yields to FOMC announcements and those to the release of the corresponding minutes. Using the factor-decomposition in Swanson (2021), I interpret these as bond market overreaction to forward guidance information contained in announcements, with a revision followed by the release of FOMC minutes. I explain this observation using a model of diagnostic expectations. Working draft

Keeping up with the Curve: Learning, Evolving Beliefs and the Anchoring of Expectations

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(Job Market Paper) I explain the behavior of inflation, unemployment, and long-run inflation expectations in the post-war U.S. by estimating a forward-looking model in which private agents learn about structural fundamentals and the policymakers’ stabilization preferences in real-time. Learning is structural: agents understand that aggregate economic dynamics result from their optimizing behavior under imperfect knowledge. Monetary policy is conducted optimally but private agents suspect that the policymakers’ stabilization preferences are evolving, which they learn from observed policy behavior. This gives rise to a nonlinear filtering problem. The model provides a novel, information-theoretic explanation of how systematic monetary policy anchors expectations when agents are learning: an increasing emphasis on real-side stabilization has made the Fed’s policy behavior more predictable, stabilizing long-run inflation expectations while at the same time rendering short-run expectations more susceptible to supply shocks. The model offers a new explanation for the recent post-Covid inflation surge and the ``costless disinflation’’ that followed, shedding light on why it differed markedly from the crisis of the 1970s and 1980s. Download paper

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