Starting in 2011, the Brazilian government tried to boost economic activity through aggressive household lending through government-owned banks. Is "household credit as stimulus" a good idea? A new paper with Gabriel Garber, @AtifRMian, and @jacopont (1/N)
nber.org/system/files/w… This is a big issue. In many developing economies, household debt has been growing. In many cases, this rise in debt is encouraged and facilitated by government policy. (2/N)

A robust finding in the macrofinance literature is that a large rise in property prices and the associated debt predicts (1) a decline in economic activity, (2) a rise in probability of financial crisis, and (3) a crash in bank equity prices. (1/N) Some relevant papers at these links: (2/N)
with @AtifRMian and @EmilVerner
academic.oup.com/qje/article-ab…

Baron and Xiong
academic.oup.com/qje/article-ab…

@KarstenMueIIer and @EmilVerner
papers.ssrn.com/sol3/papers.cf…

with @AtifRMian
aeaweb.org/articles?id=10…

Why should we care about high levels of income inequality? The immediate answer is usually that we value fairness, and extremely high levels of income inequality are unfair. I of course sympathize with that view. (1/N) However, high levels of income inequality also present serious structural challenges to the overall economy, which is a common thread in the studies I have worked on with @AtifRMian and @ludwigstraub. (2/N)

Yes, as @guido_lorenzoni mentioned, we originally wrote a paper on this in 2015, and we updated it through 2018. Bottom line is that all measures of economic expectations change dramatically with Obama 2008 win and Trump 2016 win, but no discernable effect on actual spending.

https://twitter.com/VMRConstancio/status/1361394154484469768

You will find evidence that partisans SAY they are spending in response to winner of election, but it is very difficult to detect actual changes in spending in administrative data.

Interest rates are low. Really really low. @ErnestLiuEcon , @AtifRMian , and I just posted a revision of paper, "Low Interest Rates, Market Power, and Productivity Growth". Basic conceptual point: low interest rates can be very bad for firm competition and growth (thread) 1/N Suppose decline in interest rates is due to demand-side factors (population aging, rising inequality, global saving glut). How will firms respond to lower interest rates when deciding how much to invest in productivity enhancement? (2/N)

Is Covid amplifying the Saving Glut of the Rich and its associated issues for the overall economy? Some thoughts on recent empirical economics research on Covid. 1/N A result that is emerging from empirical Covid economics research is a rise in savings by highest income individuals. Their income has not suffered much, but their spending has declined substantially. Here is the UK version of this from Andy Haldane's speech last week: 2/N

I finished the excellent "Trade Wars are Class Wars" by @M_C_Klein and @michaelxpettis a couple of weeks ago. It is a fantastic book, a must-read especially for my academic economist colleagues The "global saving glut" of @benbernanke made the idea of "financial excesses" broadly known among academics, but the issue is far broader. Trade Wars are Class Wars provides the historical context, and makes clear connections between trade wars, inequality, and saving gluts.

Some thoughts from interview with @M_C_Klein, related to research with @AtifRMian and @ludwigstraub:

central point: Covid recession will further damage already weak economy unless we significantly change course.

https://twitter.com/M_C_Klein/status/1268922873957109760

The indebted demand framework makes the case that rising inequality fuels a saving glut of the rich, putting downward pressure on interest rates and ultimately economic output.

The world economy entered the COVID-19 crisis with very low interest rates and very high debt levels, which will complicate policy efforts to boost the economy. We released two @nberpubs papers that address how this happened and what it means for policy (@AtifRMian @ludwigstraub) Both studies point to the rise in income inequality as a central culprit. The rich save more than the non-rich, and therefore a rise in income inequality creates a "saving glut of the rich" which has fueled the rise in household and gov debt since the 1980s.

I spent a decent amount of time doing some economic forecasting during the 2012-2015 period. I was consistently more pessimistic than median forecasts on GDP growth, and such pessimism ended up being correct. I am feeling similar right now. The obvious unknown is the length of the COVID-19 health crisis. Longer health crisis, worse outcomes for economy. But for every potential crisis depth/length, I am more pessimistic than most forecasts I am seeing. Here are reasons:

1/ sharp decline in U.S. unemployment rate led me to update work with @AtifRMian on differential increase in unemployment rate across U.S. counties by size of housing collapse during Great Recession 2/ Notice that pre 2006, counties with largest subsequent housing collapse saw similar unemployment rates, and even weak evidence of a larger decline in unemployment rate.