Working papers and work in progress:
Bottom-up inflation nowcasting with scanner data: Unlocking welfare gains from high-frequency information (with Kai Carstensen, Jan-Oliver Menz, Richard Schnorrenberger and Elisabeth Wieland)
Abstract
We show that millions of highly granular, weekly household scanner data help to improve the nowcast of monthly German inflation in real time to an extent that allows for substantial welfare gains when used by monetary policy. Our nowcasting exercise proceeds in two steps. First, at the most disaggregated level of the consumption basket underlying official inflation, we construct a large set of weekly scanner-based price indices and use them to nowcast their official counterparts. Second, we aggregate these nowcasts to the level of product groups, such as processed and unprocessed food, and to headline inflation using the official aggregation scheme. We complement this bottom-up approach with machine learning methods that apply shrinkage estimation to directly exploit the large set of scanner-based price indices. At all levels of aggregation, we achieve significant forecasting gains relative to a time-series benchmark model, notably already after the first seven days of a month. We also find that our nowcasts of headline inflation outperform survey-based inflation expectations, which are notoriously difficult to beat. Simulation results of a New Keynesian model with incomplete information show that improvements in inflation nowcasting of the magnitude achieved in our empirical exercise imply substantial welfare gains, especially in periods of high economic uncertainty.
Available as ECB working paper at: https://www.ecb.europa.eu/pub/pdf/scpwps/ecb.wp2930~05cff276eb.en.pdf?fe0a072f86258f7c499e7a397d88db61. Online appendix
Prices and global inequality: New evidence from worldwide scanner data (with Xavier Jaravel and Liuxiu Liu)
Abstract
How do prices a ect inequality and living standards worldwide? To address existing biases in the measurement of prices and expenditure patterns across countries, this paper introduces a new global scanner database. This dataset provides harmonized barcode-level data on expenditures and prices for fast-moving and slow-moving consumer goods during the last decade in thirty four countries, which include both developing (e.g., Brazil, China, India, and South Africa) and developed countries (e.g., the United States, Russia, and most European countries) and represent 70% of world GDP and 60% of world population. We rst quantify the importance of several common biases stemming from substitution, product variety, and taste shocks, and we characterize how these biases vary with the level of economic development. We then build purchasing power parity indices using identical barcodes across countries. We find that adjustments for product variety, non-homotheticities, and taste heterogeneity are quantitatively important. Overall, these ndings indicate that using micro data on prices and expenditures is crucial to accurately describe patterns of inclusive growth worldwide.
An older version of the paper is available at: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3671980
Pass-through of local corporate taxes to consumer prices: Evidence from German micro data (with Sebastian Kessing, Sebastian Siegloch and Malte Zoubek).
Abstract
Tax incidence, i.e. the question who bears the burden of a particular tax, has been a classic topic in public finance, and it is intricately linked to tax pass-through- Our paper quantitiatvely evaluates whether, and to what extent, firms can shift corporate taxes to prices. Conceptually, this requires a setting of imperfect competition. This is empirically plausible, but has been somewhat neglected in most of the modern literature on corporate tax incidence building on Harberger’s (1962) seminal analysis. Recent studies have shown empirically that workers bear a substantial share of the burden of corporate taxes (approximately 30-50%, see Fuest et al. (2018), and Suarez Serrato and Zidar (2016)). This raises the question, whether the remaining burden will be borne by capital, or whether this burden may be shifted upstream to suppliers or downstream to customers and final consumers. The project focuses on the latter channel, i.e. the pass-through rate of corporate taxes to prices, for which no convincing empirical evidence exists.
Price and quantity effects of a temporary VAT cut: Evidence from scanner data on durables and non-durables (with Muzammil Hussain, Xavier Jaravel, Sebasting Kessing and Sebastian Siegloch).
Selected (relevant) publications in refereed journals
Price gaps at the border: evidence from multi-country household scanner data (with Hans-Helmut Kotz and Natalia Zabelina), forthcoming in the Journal of International Economics. 2020. Online version | Working paper version | Replication folder.
Price elasticities and demand-side real rigidities in micro data and in macro models, (with Sarah M. Lein), Journal of Monetary Economics, forthcoming. 2019. Online version.
On the importance of sectoral and regional shocks for price-setting, (with Kirstin Hubrich and Massimiliano Marcellino), Journal of Applied Econometrics, Vol. 31(7), pages 1234-1253, 2015. Online version.
Regional inflation dynamics within and across euro area countries and a comparison with the US (with Kirstin Hubrich and Massimiliano Marcellino), Economic Policy, Vol. 57, pages 141-184, 2009.
Central bank misperceptions and the role of money in interest rate rules (with Volker Wieland), Journal of Monetary Economics, Vol. 55, pages 1-17, 2008.
Money in monetary policy design: A formal characterization of ECB-style cross-checking (with Volker Wieland). Journal of the European Economic Association, Vol. 5(2-3), pages 524-533, 2007.
Learning and control in a changing economic environment (with Volker Wieland). Journal of Economic Dynamics and Control, Vol. 26 (9-10), pages 1359-1377, August 2002.
Publications in monographs
Money in monetary policy design: Monetary cross-checking in the New-Keynesian model (with Volker Wieland). Published in: V. Wieland (Ed.), The Sience and Practice of Monetary Policy Today, Springer Science, 2010.
Recent policy-related publications
Les activites de shadow banking dans un contexte de bas taux d’interet: une perspective de flux financiers’ (Euro area shadow banking activities in a low- interest-rate environment: a flow-of-funds perspective) (with Hans-Helmut Kotz). Revue d’Economie Financiere, pages 235-256, 2016.
Lost in translation? ECB’s monetary impulses and financial intermediaries’ responses (with Hans-Helmut Kotz and Natalia Zabelina) . SAFE White Paper No. 37, 2016.
Euro area macro-financial stability: A flow-of-funds perspective (with Hans- Helmut Kotz and Natalia Zabelina). SAFE White Paper No. 29, 2015.
Older contributions (that still have some relevance)
Inflation dispersion and convergence in monetary and economic unions: Lessons for the ECB (with Axel A. Weber) | Download: PDF Version
Price Stability, Inflation Convergence and Diversity in EMU: Does One Size Fit All? (with Axel A. Weber). | Download: PDF Version
Refereeing
Computational Economics, European Economic Review, German Economic Review, Journal of Economic Dynamics and Control, Journal of the European Eco- nomic Association, Journal of International Economics, Journal of Macroeco- nomics, Journal of Money, Credit and Banking, Journal of Monetary Economics, Scandinavian Journal of Economics