Research
Learning about the Long Run
Leland Farmer, Emi Nakamura, and Jón Steinsson
Bayesian learning can explain all prominent forecast anomalies by professional forecasters and deviations from the expectations hypothesis of the term structure
The Slope of the Phillips Curve: Evidence from U.S. States
Jonathon Hazell, Juan Herreno, Emi Nakamura, and Jón Steinsson
Quarterly Journal of Economics, 137(3), 1299-1344, August 2022.
Evidence from new state-level CPI data suggests the slope of the Phillips curve is small and was small during the 1980s. Volcker disinflation was mostly due to rapid downward shift in inflationary expectations.
Appendix — State Level CPI Data (BETA) -- ReadMe for State Level CPIs
The Elusive Costs of Inflation: Price Dispersion during the U.S. Great Inflation
Emi Nakamura, Patrick Sun, Jón Steinsson, and Daniel Villar
Quarterly Journal of Economics, 133(4), 1933-1980, November 2018.
Evidence on the size of price changes indicates that price dispersion was no higher during the Great Inflation than in recent years. This suggests that the standard New Keynesian analysis of the welfare costs of inflation is wrong and its implications for the optimal inflation rate need to be reassessed.
Appendix -- Slides -- ELI Concordance -- Replication Material
High Frequency Identification of Monetary Non-Neutrality: The Information Effect
Emi Nakamura and Jón Steinsson
Quarterly Journal of Economics, 133(3), 1283-1330, August 2018.
Nominal and real rates respond one-for-one to FOMC announcements, while expected inflation responds very little. Expectations of growth rise after surprise monetary tightenings suggesting information effects are important.
Appendix -- Slides -- Replication Files -- Policy News Shocks (original sample period)
Policy News Shocks constructed by Acosta and Saia for an updated sample period may be found here.
The Discounted Euler Equation: A Note
Alisdair McKay, Emi Nakamura, and Jón Steinsson
Economica, 84, 820-831, October 2017.
The discounted Euler equation mutes the extent to which far future changes in interest rates affect current output and inflation. At the ZLB, the discounted Euler equation makes ‘deflationary death spirals’ less likely.
The Power of Forward Guidance Revisited
Alisdair McKay, Emi Nakamura, and Jón Steinsson
American Economic Review, 106(10), 3133-3158, October 2016.
Standard models imply that far future interest rate changes have implausibly large effects on output and inflation. Allowing for precautionary savings and borrowing constraints can mute these effects, yielding a more plausible model of the monetary transmission mechanism
Lost in Transit: Product Replacement Bias and Pricing to Market
Emi Nakamura and Jón Steinsson
American Economic Review, 102(7), 3277-3316, December 2012.
40% of products in U.S. micro price data are replaced before they have a single price change. Price indexes based on price changes for identical items will thus suffer from “product replacement bias.” Correcting for this bias substantially increases exchange rate pass-through.
Monetary Non-Neutrality in a Multi-Sector Menu Cost Model
Emi Nakamura and Jón Steinsson
Quarterly Journal of Economics, 125(3), 961-1013, August 2010.
Incorporating heterogeneity in the price rigidity increases the degree of monetary non-neutrality in a menu cost model by a factor of three. Incorporating intermediate inputs adds another factor of three. With these additions, the menu cost model can generate substantial monetary non-neutrality