February 2024

New work with Jean Helwege (UC Riverside) titled Adaptive Risk Preferences: Unraveling the Impact of Monetary Policy on Output introduces a novel approach for measuring time variation in habit-based preferences using corporate bond data, and employs this approach to estimate moments that describe the link between surplus consumption and output. Using a model that integrates macroeconomic dynamics with habit-based preferences, we show that our evidence on the relationship between surplus consumption and the output gap is most consistent with a model specification where a monetary policy shock of 1% reduces output by 2.2% and has a trough at 9-10 quarters. This evidence is relevant for recent studies that rely on the preference-output gap link to induce hump-shaped output responses to monetary policy shocks.

Seminar and conference presentations at Tsinghua PBCSF, Chicago Fed, Cleveland Fed