Prof. Dr. Alexander Kriwoluzky
Dr. Josefin Meyer

Frontier papers in Macroeconomics

Aim
This course aims at enabling students to conduct research in promising areas
in macroeconomics. Research areas that attract a lot of attention recently are
geoeconomics, i.e. the political use of trade and capital flows, debt sustainability
after two major economic crisis, the rise of inflation and its unequal
consequences for households as well as its implications for the dynamic between
monetary and fiscal policy especially in the euro area.
In a first step, we read and discuss recent papers and some classics. The
fruitful discussions and the intensive engagement with the topics should lead
to the development of independent research ideas.

Time and Venue
The first meeting (October 19th) will be on WebEx (Link)
Seminar: Wednesday, 2 pm - 4 pm
Exercises: November 2nd, 9th, 16th, 23th, and 30th
Venue: December 21, 2022 and January 16, 2023: Elinor Ostrom Hall -
1.2.019 at DIW Berlin, otherwise Karl Popper Room - 2.3.020 at DIW
Exercises
There will be five exercises. The first part cover some empirical methods such
as local projections and proxy SVAR models.The second part introduces scientific
working with an emphasis on working with historical and large-scale
data.

Grading
We start by reviewing some recent papers, which deal with promising potential
research topics. Each student will be asked to present one of the papers
in class. The presentation will count for 10% of the grade. Participation
in the following discussion will count for another 20%. The exercise classes
will contain some homework. The solution and potential presentation of the
solution will count for another 20%.
Students are asked to develop their own research ideas in the second part
of the class. The presentation of the research ideas will count for 20%, a 5
page summary of the research idea for 30% of the final grade.

Potential papers
International capital flows
• Political ties and its impact on sovereign borrowing conditions: Ambrocio
and Hasan (2021)
• Economic sanctions and its impact on exchange rates: Itskhoki and
Mukhin (2022)
• Geopolitical risk and its impact on investment: Caldara and Iacoviello
(2022)
• Sources and international transmission of country risk: Hassan, Schreger,
Schwedeler, and Tahoun (2021)
Trade, trade policy, and economic welfare
• Foreign policy and its impact on trade: Berger, Easterly, Nunn, and
Satyanath (2013)
• Discriminatory trade policy and its impact on trade: de Bromhead,
Fernihough, Lampe, and O’Rourke (2019)
• Trade and its impact on economic development: Fajgelbaum and Redding
(2022)
• Historical events and its long-run effect on economic development: Gokmen,
Vermeulen, and V´ezina (2020)
Debt sustainability, resolution and cost of sovereign defaults
• Public debt overhang and economic growth: Reinhart, Reinhart, and
Rogoff (2012)
• Debt Relief and its impact on sovereign borrowing conditions: Lang,
Mihalyi, and Presbitero (2021)
• Sovereign risk and its impact on credit supply access: Acharya, Eisert,
Eufinger, and Hirsch (2018)
• Economic sanctions and sovereign default: Bianchi and Sosa-Padilla
(2022)
• Optimality of financial repression: Chari, Dovis, and Kehoe (2020)
Monetary policy and heterogeneity
• Estimated HANK model: Bayer, Born, and Luetticke (2020), Auclert,
Rognlie, and Straub (2020)
• Monetary policy and the role of heterogeneity: Auclert (2019), Kaplan,
Moll, and Violante (2018), Luetticke (2021)
• Distributional effects of inflation: ?, Cardoso, Ferreira, Leiva, Nu˜no,
Ortiz, Rodrigo, and Vazquez (2022),
• Heterogenous expectations: Reis (2021b), Reis (2021a)
Fiscal Theory of the Price Level
• Introduction: Leeper (1991, 2011); Leeper and Leith (2016)
• Empirical evidence: (Kliem, Kriwoluzky, and Sarferaz, 2016), (Bianchi
and Ilut, 2017)
• Current debate: (Bianchi and Melosi, 2022)
Modern empirical tools
• Sign of the empirical shock: Barnichon, Debortoli, and Matthes (2021),
(Barnichon and Matthes, 2018)
• Counterfactual in empirical models: (Georgiadis, M¨uller, and Schumann,
2021), (Breitenlechner, Georgiadis, and Schumann, 2022)
• How to deal with Covid in time series models: (Lenza and Primiceri,
2021; Cascaldi-Garcia, 2022

Acharya, S. and Dogra, K. (2020). Understanding HANK: Insights From a PRANK. Econometrica.

Ahn, S., Kaplan, G., Moll, B., Winberry, T., and Wolf, C. (2018). When Inequality Matters for Macro and Macro Matters for Inequality. NBER Macroeconomics Annual.

Altavilla,  C.,  Brugnolini,  L.,  Gu¨rkaynak,  R.  S.,  Motto,  R.,  and  Ragusa,

G. (2019). Measuring euro area monetary policy. Journal of Monetary Economics.

Altavilla, C., Canova, F., and Ciccarelli, M. (2020). Mending the broken link: Heterogeneous bank lending rates and monetary policy pass-through. Journal of Monetary Economics, 110.

Auclert, A. (2019). Monetary policy and the redistribution channel. Ameri- can Economic Review.

Auclert, A., Rognlie, M., Souchier, M., and Straub, L. (2021). Exchange Rates and Monetary Policy with Heterogeneous Agents: Sizing up the Real Income Channel. NBER Working Papers 28872, National Bureau of Economic Research, Inc.

Auclert, A., Rognlie, M., and Straub, L. (2018). The Intertemporal Keyne- sian Cross. National Bureau of Economic Research.

Auclert, A., Rognlie, M., and Straub, L. (2020). Micro Jumps, Macro Humps: Monetary Policy and Business Cycles in an Estimated HANK Model. Tech- nical report.

Barrage, L. (2020). The fiscal costs of climate change. AEA Papers and Proceedings, 110:107–12.

Bayer, C., Born, B., and Luetticke, R. (2020a). Shocks, Frictions, and In- equality in US Business Cycles. CEPR Discussion Papers.

Bayer, C., Born, B., and Luetticke, R. (2020b). The Liquidity Channel of Fiscal Policy. SSRN.

Bilbiie, F. O. (2019). Monetary Policy and Heterogeneity: An Analytical Framework. Mimeo.

Bolton, P. and Kacperczyk, M. (2021). Global Pricing of Carbon-Transition Risk. NBER Working Papers 28510, National Bureau of Economic Re- search, Inc.

Coibion, O., Gorodnichenko, Y., Kueng, L., and Silvia, J. (2017). Innocent Bystanders? Monetary policy and inequality.

de Ferra, S., Mitman, K., and Romei, F. (2020). Household heterogeneity and the transmission of foreign shocks. Journal of International Economics.

Derenoncourt, E., Kim, C. H., Kuhn, M., and Schularick, M. (2021). The racial wealth gap, 1860-2020.

Engle, R. F., Giglio, S., Kelly, B., Lee, H., and Stroebel, J. (2020). Hedging climate change news. Review of Financial Studies, 33(3).

Ettmeier, S. and Kriwoluzky, A. (2019). Same, but different? Testing mon- etary policy shock measures. Economics Letters, 184.

Fried, S., Novan, K., and Peterman, W. B. (2021). The Macro Effects of Climate Policy Uncertainty. Finance and Economics Discussion Series 2021-018, Board of Governors of the Federal Reserve System (U.S.).

Gertler, M. and Karadi, P. (2015). Monetary policy surprises, credit costs, and economic activity. American Economic Journal: Macroeconomics, 7(1).

Hansen, L. P. (2021). Central Banking Challenges Posed by Uncertain Cli- mate Change and Natural Disasters. SSRN Electronic Journal.

Kaenzig, D. (2021). The unequal economic consequences of carbon pricing.

Kaplan, G., Moll, B., and Violante, G. L. (2018). Monetary policy according to HANK.

Kaplan, G. and Violante, G. L. (2021). The Marginal Propensity to Consume in Heterogeneous-Agent Models.

Lenza, M. and Slacalek, J. (2018). How does monetary policy affect income and wealth inequality? Evidence from quantitative easing in the euro area. Working Paper Series.

Luetticke, R. (2021). Transmission of Monetary Policy with Heterogeneity in Household Portfolios. American Economic Journal: Macroeconomics, 13(2).

Mertens, K. and Olea, J. L. M. (2018). Marginal tax rates and income: New time series evidence. Quarterly Journal of Economics.

Metcalf, G. E. and Stock, J. H. (2020). The macroeconomic impact of eu- rope’s carbon taxes. Working Paper 27488, National Bureau of Economic Research.

Miranda-Agrippino, S. and Ricco, G. (2020). The Transmission of Monetary Policy Shocks. American Economic Journal: Macroeconomics.

Paul, P. (2020).   Banks, Maturity Transformation, and Monetary Policy.

Working Paper Series 2020-07, Federal Reserve Bank of San Francisco.

Ramey, V. A. (2016). Macroeconomic Shocks and Their Propagation. NBER Working Paper, (1):1–5.

Reis, R. (2020). The People versus the Markets: A Parsimonious Model of Inflation Expectations.

Seidl, H. and Seyrich, F. (2021). Unconventional Fiscal Policy in HANK. Technical report.

Tenreyro, S. and Thwaites, G. (2016). Pushing on a string: Us monetary policy is less powerful in recessions. American Economic Journal: Macroe- conomics, 8(4).

Wolf, C. K. (2021). Interest Rate Cuts vs. Stimulus Payments: An Equiva- lence Result.