Working Papers
Rational Inattention Choices in Households and Firms (Job Market Paper) [New version coming soon!]
Abstract. Recent surveys indicate that households associate higher expected inflation with lower expected output growth, while firms and professionals often associate higher expected inflation with higher expected growth. Standard macroeconomic models struggle to explain this heterogeneity. This paper explains the asymmetric view by allowing households and firms to endogenously choose what they pay attention to, based on their respective incentives. Households find it optimal to pay more attention to supply shocks because that most affects their real income, while firms optimally pay more attention to demand shocks because of their larger impact on profits. I develop a dynamic general equilibrium model with rationally inattentive households and firms and show that its predictions align with survey evidence. Attention choices influence the propagation of the shocks, affecting the slope of the Phillips curve. Furthermore, central bank communication that fails to consider the heterogeneous attention choices may have unintended consequences.
Presentations: 2025 World Congress of the Econometric Society (ESWC), Seoul*; Workshop on Macroeconomic Expectations, Padua*; JME-SNB-Gerzensee Conference on Informational Frictions in Macroeconomics (in Honor of Robert E. Lucas, Jr.), October 25 - 26, 2024; EEA 2024; 53rd Annual Conference of the Money, Macro and Finance Society (MMF); PhD-Economics Virtual Seminar (EVS ); RES 2024 Annual Conference, Belfast; EPOC Doctoral Workshop, Venice; Norges Bank Workshop; Expectations in Dynamic Macroeconomic Models, Vienna; Economics Research Jamboree (2023); Behavioural Finance Group (BFG) (2023); PhD Economics Virtual Seminar; Warwick/Oxford Macro/International workshop (2023).
Sunspots, Expectations and Asset Pricing (with Guido Ascari) [Paper]
(Submitted)
Abstract. We propose a theory of asset pricing based on limited memory and time-varying expectations. The former guarantees a tendency to revert to fundamentals. The latter induces `momentum' in asset prices and it is motivated by a novel empirical observation about a time-varying mapping from price-dividend ratio to return expectations in survey data. The simulated method of moments shows that the model quantitatively replicates a host of asset-pricing features, including equity premium, excessive volatility, persistence of price-dividend ratio, predictability of excess returns and the consumption correlation puzzle. The model also generates empirically plausible subjective expectations.
Presentations: Expectations in Dynamic Macroeconomic Models, Vienna; EEA-ESEM 2022, Milan; 53rd Annual Conference of the Money, Macro and Finance Society (MMF), Canterbury; Royal Economic Society (RES) Symposium of Junior Researchers; 4th Behavioural Macroeconomics Workshop, Bamberg (2022); 28th International Conference on Computing in Economics and Finance, Dallas (2022); 6th International Workshop on Financial Markets and Nonlinear Dynamics, Paris (2022); 7th International Young Finance Scholars' Conference (2021); 1st PhD Workshop on Expectations in Macroeconomics; Oxford Macro Working Group Seminar (2021).
Restoring Existence and Uniqueness at the Effective Lower Bound with Simple Fiscal Policy (with David Murakami and Ivan Shchapov) [Paper]
(Revise and Resubmit, Journal Economic Dynamics and Control)
Abstract. The presence of an occasionally binding constraint from the effective lower bound (ELB) in New Keynesian models often leads to multiple or no equilibria. The problem stems from a strong feedback loop between expectations (of inflation and output) and current outcomes at the ELB. We show that simple fiscal policy rules can introduce additional stabilising forces that dampen this loop, thereby ensuring the existence and uniqueness of an equilibrium.
Silenced by Uncertainty: Firm Attention and the Effectiveness of Monetary Policy (with Silvia Albrizio, Allan Dizioli and Pedro Simon)
Abstract. Managing inflation expectations is an important instrument for monetary policy. In theory, monetary policy should be more effective if firms pay attention to the central bank. This paper is the first to empirically test this hypothesis by introducing novel text-based measures of inflation expectations and attention measures at the firm level. We show that in low-uncertainty environment, attention to central bank enhances the effectiveness of monetary policy, but this channel is muted in high-uncertainty environment. We then build a rational inattention model of firms with an endogenous choice of paying a fixed cost to obtain additional information from the central bank to rationalize the empirical evidence. The model predicts that in high-uncertainty environment, firms are already more informed about the economic conditions, and thus the information from central bank provides less new information.
Publications
Attention, please! Listening to the central bank in uncertain times (with Silvia Albrizio, Allan Dizioli and Pedro Simon). AEA Papers and Proceedings (2025, Vol. 115)
Selected Work in Progress
Limited Memory and Determinacy in the New Keynesian Model (with Guido Ascari and David Murakami)
Global Determinacy according to HANK (with David Murakami and Ivan Shchapov)
Policy Work
How Wealthy is Jordan? Measuring Jordan’s Comprehensive Wealth using Wealth of Nations Approach (1995–2018) (with Saadia Refaqat)