Benjamin A. Malin

Testing for Keynesian Labor Demand

According to the textbook Keynesian model, short-run demand for labor is sensitive to the demand for goods. In this view, sellers deviate from setting the marginal product of labor proportional to the real wage, instead enduring or choosing lower price markups when demand for goods is high. We test this prediction across U.S. industries in the two decades up through the Great Recession. To identify movements in goods demand, we exploit how durability varies across 70 categories of consumption and investment. We also take into account the flexibility of prices and capital-intensity of production across goods. We find evidence in support of Keynesian Labor Demand.

Fiscal Implications of the Federal Reserve’s Balance Sheet Normalization

This Note summarizes analysis conducted in our recent FEDS working paper that seeks to understand the fiscal implications of the Federal Reserves balance sheet normalization program.

Fiscal Implications of the Federal Reserve's Balance Sheet Normalization

The paper surveys the recent literature on the fiscal implications of central bank balance sheets, with a special focus on political economy issues. It then presents the results of simulations that describe the effects of different scenarios for the Federal Reserves longer-run balance sheet on its earnings remittances to the U.S. Treasury and, more broadly, on the governments overall fiscal position. We find that reducing longer-run reserve balances from

A smolyak collocation algorithm for an international real business cycle model

2.3 trillion (roughly the current amount) to

Microeconomic Evidence on Price-Setting

1 trillion reduces the likelihood of posting a quarterly net loss in the future from 30 percent to under 5 percent. Further reducing longer-run reserve balances from

Solving the multi-country real business cycle model using a Smolyak-collocation method

1 trillion to precrisis levels has little effect on the likelihood of net losses.

Reset Price Inflation and the Impact of Monetary Policy Shocks

We describe a sparse grid collocation algorithm to compute recursive solutions of dynamic economies with a sizable number of state variables. We show how powerful this method may be in applications by computing the nonlinear recursive solution of an international real business cycle model with a substantial number of countries, complete insurance markets and frictions that impede frictionless international capital flows. In this economy the aggregate state vector includes the distribution of world capital across different countries as well as the exogenous country-specific technology shocks. We use the algorithm to efficiently solve models with 2, 4, and 6 countries (i.e., up to 12 continuous state variables).