The Aggregate Implications of Regional Business Cycles

Beraja, Martin; Hurst, Erik; Ospina, Juan

doi:10.3386/w21956

Cited by 67 publications

(55 citation statements)

References 43 publications

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“…We show how local estimates can vary from the aggregate using a general equilibrium model. Our approach is close to Beraja, Hurst, and Ospina (2016) who use regional variation in wages to discipline key model parameters and then use a structural model to analyze the aggregate effect of shocks.…”

Section: Introductionmentioning

confidence: 99%

Regional Consumption Responses and the Aggregate Fiscal Multiplier

Dupor¹,

Karabarbounis²,

Kudlyak³

et al. 2021

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We use regional variation in the American Recovery and Reinvestment Act (2009-2012) to analyze the effect of government spending on consumer spending. Our consumption data come from household-level retail purchases in Nielsen and auto purchases from Equifax credit balances. We estimate that a $1 increase in county-level government spending increases consumer spending by $0.18. We translate the regional consumption responses to an aggregate fiscal multiplier using a multi-region, New Keynesian model with heterogeneous agents and incomplete markets. Our model successfully generates the estimated positive local multiplier, a result that distinguishes our incomplete markets model from models with complete markets. The aggregate consumption multiplier is 0.4, which implies an output multiplier higher than one. The aggregate consumption multiplier is almost twice the local estimate because trade linkages propagate government spending across regions.

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Section: Introductionmentioning

confidence: 99%

Regional Consumption Responses and the Aggregate Fiscal Multiplier

Dupor¹,

Karabarbounis²,

Kudlyak³

et al. 2021

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show abstract

“…30 When monetary policy doesn't respond to shocks, Beraja et al (2016) find that regional and aggregate elasticities are similar. Thus, the back of the envelope calculations may actually not be far off.…”

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confidence: 91%

“…With mobile labor or flexible interest rates, job losses in one region may facilitate job growth in other regions, causing regional elasticities to overstate aggregate effects. In the model of Beraja et al (2016), regional elasticities to a discount rate shock are 2.3 times that of an aggregate shock. This would imply that falling house prices reduced employment by 1.5% in aggregate instead of 3.5%.…”

Section: Aggregate Effectmentioning

confidence: 99%

“…33 If the Federal Reserve's unconventional monetary policy operations were successful enough that general equilibrium effects estimated by Beraja et al (2016) still held at the zero lower bound, this would further dampen the effects by a factor of 2.3. Thus the conservatively estimated decline in employment due to real estate shocks would be between 70 and 73 basis points.…”

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confidence: 99%

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Housing Bust, Bank Lending & Employment: Evidence from Multimarket Banks

Glancy

2017

FEDS

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I use geographic variation in bank lending to study how bank real estate losses impacted the supply of credit and employment during the Great Recession. Banks exposed to distressed housing markets cut mortgage and small business lending relative to other banks in the same county. This lending contraction had real effects, as counties whose banks were exposed to adverse shocks in other markets suffered employment declines, especially in young firms. This finding is robust to instrumenting for bank exposure to housing shocks using shocks in distant markets, exposure based on historical lending, or exposure to markets with inelastic housing supply. JEL Codes: E24, E44, G21.

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“…With only a small number of recessions, it is essentially impossible to determine directly from the data which particular features of this distribution determine the strength of the refinancing channel of monetary policy. Second, echoing ideas in Beraja, Hurst, and Ospina (2016), drawing conclusions about aggregate spending from regional evidence requires accounting for offsetting behavior by lenders which cannot be measured in our data.…”

Section: Introductionmentioning

confidence: 99%

Regional Heterogeneity and Monetary Policy

2015

Self Cite

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We argue that the time-varying regional distribution of housing equity influences the aggregate consequences of monetary policy through its effects on mortgage refinancing. Using detailed loan-level data, we show that regional differences in housing equity affect refinancing and spending responses to interest rate cuts but that these effects vary over time with changes in the regional distribution of house price growth. We then build a heterogeneous household model of refinancing with both mortgage borrowers and lenders and use it to explore the aggregate implications for monetary policy arising from our regional evidence. We find that the 2008 equity distribution made spending in depressed regions less responsive to interest rate cuts, thus dampening aggregate stimulus and increasing regional consumption inequality, whereas the opposite occurred in some earlier recessions. Taken together, our results strongly suggest that monetary policy makers should track the regional distribution of equity over time.

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The Aggregate Implications of Regional Business Cycles

Cited by 67 publications

References 43 publications

Regional Consumption Responses and the Aggregate Fiscal Multiplier

Regional Consumption Responses and the Aggregate Fiscal Multiplier

Housing Bust, Bank Lending & Employment: Evidence from Multimarket Banks

Regional Heterogeneity and Monetary Policy

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The Aggregate Implications of Regional Business Cycles

Cited by 67 publications

References 43 publications

Regional Consumption Responses and the Aggregate Fiscal Multiplier

Regional Consumption Responses and the Aggregate Fiscal Multiplier

Housing Bust, Bank Lending &amp; Employment: Evidence from Multimarket Banks

Regional Heterogeneity and Monetary Policy

Contact Info

Product

Resources

About

Housing Bust, Bank Lending & Employment: Evidence from Multimarket Banks