Emi Nakamura, Clark Medalist 2019
Emi Nakamura is an empirical macroeconomist who has greatly increased our understanding of price-setting by firms and the effects of monetary and fiscal policies. Nakamura’s distinctive approach is notable for its creativity in suggesting new sources of data to address long-standing questions in macroeconomics. The datasets she uses are more disaggregated, or higher-frequency, or extending over a longer historical period, than the postwar, quarterly, aggregate time series that have been the basis for most prior work on these topics in empirical macroeconomics. Her work has required painstaking analysis of data sources not previously exploited, and at the same time displays a sophisticated understanding of the alternative theoretical models that the data can be used to distinguish.Nakamura is best known for her use of microeconomic data on individual product prices to draw conclusions about the empirical validity of models of price-setting used in the macroeconomic literature; this has been a critical issue for analysis of the short-run effects of monetary policy. Studies of the adjustment of individual prices—in particular, measures of the average time that prices are observed to remain unchanged—have long been a key source of evidence regarding the importance of price rigidity. However, until very recently most evidence of this kind came from studies of a very small number of markets, so that the question of how typical these specific prices were remained an important limitation. The availability of new data sets that allow changes in the prices of a very large number of goods to be tracked simultaneously has radically transformed this literature over the past fifteen years, and Nakamura, together with her frequent co-author Jón Steinsson, has played a leading role in this development.
In their most-cited paper, “Five Facts About Prices: A Re-Evaluation of Menu Cost Models” (QJE 2008), Nakamura and Steinsson study the BLS data on individual prices used to construct the published consumer and producer price indices for the U.S. economy, documenting a variety of facts about changes in individual prices that can then be compared to the implications of a popular theoretical model of price adjustment, the “menu cost” model. They give particular attention to the average frequency of price changes, an important issue in the numerical calibration of quantitative models of the effects of monetary policy. While past studies using other sources had concluded that the median time between price changes in the U.S. economy was nearly a year, the first work using the BLS microdata (by Mark Bils and Pete Klenow) had argued that the BLS data underlying the CPI showed that prices actually changed much more frequently (a median duration of prices only a little over 4 months). Bils and Klenow actually did not use the BLS micro dataset, but rather an extract from it for the period between 1995 and 1997 that reported average frequencies of price changes at a very disaggregated level. Nakamura and Steinsson instead obtained access to the actual micro data used by the BLS, which has all the price observations collected by the BLS and for the period from 1988 to 2005.
Revisiting Bils and Klenow’s conclusion using their superior dataset, Nakamura and Steinsson show that one’s conclusions about the frequency of price changes in the CPI data depend on the method used to distinguish sales from changes in “regular prices.” They also study the changes in individual wholesale prices and consumer prices. They find both that changes in regular prices occur much less often than price changes that include sales (they find a median duration of 8-11 months for regular prices, depending on the precise method used to classify price changes), and that producer prices (for which there is less of a need to filter out “sales”) also change quite infrequently. A first reason why this paper is so influential is that it gives very convincing microeconomic evidence for much more substantial “stickiness” of individual prices than the surprising results of Bils and Klenow had implied. The paper is also valuable for documenting features of the data on individual price changes that can be used to test the realism of specific models of price adjustment. Nakamura and Steinsson stress two features of the data that are contrary to the predictions of a popular class of models of price adjustment (“menu-cost” or “S-s” models): clear seasonality in the frequency of price adjustments, and the failure of the hazard function for price changes to increase in the time since the last change in price.
The ability of a “menu-cost” model to account for the quantitative characteristics of the micro data on price changes is considered further in “Monetary Non-Neutrality in a Multi-Sector Menu Cost Model” (QJE 2010, also with Steinsson). Prior numerical analyses of the implications of menu-cost models (such as the influential paper by Golosov and Lucas) had assumed that all goods in the economy were subject to menu costs of the same size (in addition to being produced with the same technology), with the parameters common to all goods being assigned numerical values to match statistics for the set of all price changes (such as the overall frequency of change in prices and the average absolute size of price changes). But one of the facts documented by Nakamura and Steinsson in “Five Facts” is that there is tremendous heterogeneity across sectors of the U.S. economy in the frequency of non-sale price changes.
In the “Monetary Non-Neutrality” paper, they calibrate a multi-sector menu-cost model to also match the distribution across sectors of both the frequency of price changes and the average size of price changes. They find that the real effects of a monetary disturbance are three times as large in their multi-sector model as in a one-sector model (like that of Golosov and Lucas) calibrated to the mean frequency of price change of all firms. Indeed, whereas Golosov and Lucas argue that price rigidity is not an empirically plausible explanation for the observed effects of monetary disturbances, if one takes account of the micro evidence on the frequency of price adjustments, Nakamura and Steinsson show that their calibrated multi-sector model (with nominal shocks of the magnitude observed for the U.S. economy) predicts output fluctuations that would account for nearly a quarter of the U.S. business cycle. This would be roughly in line with the fraction of GDP variability that is attributed to monetary disturbances in atheoretical vector-autoregression studies. The paper’s emphasis on the importance of taking account of sectoral heterogeneity when parameterizing the degree of price stickiness has been highly influential.
More recently, Nakamura and Steinsson have devoted considerable effort to extending the BLS micro-level data set on consumer prices back to 1977. This labor-intensive, multiyear data-construction project is of interest because the extended database now includes the period in the late 1970s and early 1980s when inflation was much higher and more volatile than it has been since 1988. The first paper making use of the extended data set is with Patrick Sun and Daniel Villar, “The Elusive Costs of Inflation: Price Dispersion During the U.S. Great Inflation” (QJE, forthcoming). The paper considers how the firms’ adjustment of their prices to changing market conditions differs in a higher-inflation environment. The authors find that “regular” (i.e., non-sale) prices were adjusted more frequently in the earlier (higher-inflation) part of their data set, and by about the amount that would be predicted by a model of optimal price adjustment considering a fixed cost (a “menu cost”) of adjusting the firm’s price. They conclude from this that it is important, when assessing the welfare costs expected to follow from choosing a permanently higher rate of inflation, to take account of the increased frequency of price adjustments that should be expected to occur, keeping prices from being as far out of line with current conditions as would otherwise be expected in a more inflationary environment.
The paper also seeks to measure the degree to which there is greater dispersion in the prices of similar products in a higher-inflation environment. Some common models of price adjustment imply that there should be: given staggering of the times at which different firms’ prices happen to be reconsidered, the price that is optimally chosen would vary depending on the rate at which prices in general increase from week to week. If so, this should be an important source of increased distortion of the allocation of resources in a higher-inflation environment. Measurement of the degree of dispersion in the prices of genuinely identical goods is difficult, since different prices for different firms’ goods might reflect heterogeneity of the goods, so that they would have different prices even with fully flexible prices.
For this reason, the authors propose instead to look at the how the average size of price changes (when prices are adjusted) differs between high- and low-inflation periods; the idea is that if prices are adjusted to their currently optimal level whenever they are changed, the size of the price changes that are observed indicates how far prices have drifted from their optimal level just before they are adjusted. They find that the average size of price increases, when they occur, is about the same (a 7 percent increase on average) in their pre-1988 sample as in their post- 1988 sample. Again, they interpret this as evidence that the timing of price changes adjusts endogenously when the rate of inflation increases, in such a way as to reduce the distortions created by inflation relative to what one would expect if the timing of price adjustments were independent of the degree to which a given firm’s prices have gotten out of line with current market conditions. The authors conclude that the welfare costs of chronically higher inflation may not be as large as welfare calculations based on sticky-price models with an exogenous frequency of price adjustment would suggest. The paper is simultaneously an important contribution to policy debates about the costs of inflation; to our understanding of historical facts about price adjustment in the US; and to the empirical basis for assessing the realism of alternative theoretical models of price-setting.
Another area in which Emi Nakamura has had a significant impact is in
the study of the effects of government spending shocks, a classic issue
in macroeconomics that has been of renewed interest following the
widespread use of fiscal stimulus measures by governments in response to
the global financial crisis. Estimates of the size of the government
spending multiplier have been quite dispersed and remain highly
controversial. Nakamura’s work with Jón Steinsson in “Fiscal Stimulus in
a Monetary Union: Evidence from U.S. Regions” (AER 2014) brought new data and a fresh identification approach to an important debate.
An important problem in estimating the fiscal multiplier is the
difficulty of finding truly exogenous changes in government spending.
Researchers have for a long time argued that changes in military
purchases are a plausible candidate for exogenous variations in
government spending. However, there have not been large variations in
aggregate military spending since the Korean War, so that aggregate
military spending is of limited use for identifying the government
spending multiplier for the U.S. economy of the past 50 years. An
important insight of Nakamura and Steinsson’s paper is that while in the
aggregate there may not have been large variation in U.S. military
spending, there has been sizeable variation in regional military
spending, and those regional variations can thus be used to estimate a
government spending multiplier. Another important problem with previous
studies is that the output effects of government spending should very
likely (according to standard theory) depend on the nature of the
monetary policy reaction. Some have argued that typical studies
under-estimate the multiplier by failing to take account of the extent
to which output effects are reduced by the typical monetary response to
output booms resulting from government purchases outside of deep
recessions, even though the likely response during a deep recession
would (arguably) be quite different. Nakamura and Steinsson’s strategy
sidesteps this problem, since the monetary policy reaction is common to
all states, and so should not be a factor in explaining the differential
effects on output across states.
A further complication in estimating government spending multipliers
is that their size depends on how changes in government spending are
financed. Previous studies have struggled with how to take into account
financing considerations. An advantage of Nakamura and Steinsson’s
empirical strategy is that regional military spending is financed by
federal taxation and thus regions that receive a large chunk of military
spending will not have tax structures that are different from regions
that do not receive military spending. Thus, considering variations in
regional military spending and relating it to regional output variations
should provide a much more reliable estimate of the government spending
multiplier than previous studies.The paper offers much more than a clever instrument for measuring the multiplier effect of government purchases. The authors point out that the multiplier estimated for the effect of relatively higher purchases in one state on relative economic activity in that state need not be the same as the multiplier for the effect on national GDP of a nation-wide increase in government purchases (the central issue for debates about the effectiveness of “fiscal stimulus” as a response to recession), because of spillovers between states of the effects of increased purchases in any given state. These spillovers occur not only because increased income in one state leads to increased purchases from out-of-state suppliers, while the national economy is less open, but also because increased relative government spending in one state is not financed by increased relative taxation of that state’s residents, while increased national spending will require increased revenue to be raised from US taxpayers in aggregate. Steinsson and Nakamura address the likely magnitude of the difference between the two multipliers by developing and analyzing a quantitative multi-region New Keynesian general-equilibrium model and asking what the national multiplier would be in the case of a model parameterization that can account for their estimated relative state-level effects. The paper provides an excellent example of work that combines non-structural empirical work with careful model-based analysis of what can be learned from the estimates and makes a substantial contribution to an applied literature of considerable importance for macroeconomic policy.
Nakamura has also made important contributions to empirical analysis
of the effects of monetary policy. “High Frequency Identification of
Monetary Non-Neutrality: The Information Effect’’ (QJE, 2018, also with
Steinsson) studies interest-rate changes in a thirty-minute window
around 106 scheduled Federal Reserve announcements between January 2000
and March 2014. As is standard in related literature, financial-market
changes observed during this thirty-minute window are attributed to
information released in the Federal Reserve announcement. However,
unlike some earlier proponents of such “high-frequency identification”
of shocks to monetary policy, Nakamura and Steinsson recognize that the
news revealed need not only represent a change in expected monetary
policy for given economic fundamentals; it could also contain news about
the state of the economy that the Fed is aware of but the markets might
not have been aware of yet, or news about how the Fed interprets the
current state of the economy differently than markets had believed prior
to the announcement. The paper's contribution is to draw inferences
about monetary non-neutrality while allowing for the possible presence
of such information effects, and to build and estimate a theoretical
model that can explain the observed effects of Fed announcements.
This problem motivates the development of a model in which Fed
announcements can have both an information effect and a pure monetary
policy shock, allowing estimation of how big each component in the
observed Fed announcements is. The results of this estimation suggest
that the proposed model can explain well the observed effects of Fed
announcement shocks; that about two-thirds of the announcement shock
represents news about future economic fundamentals, and hence that only
one-third represents a pure monetary policy shock; and that, despite the
great importance of the information effect, the observed responses to
Fed announcements are consistent with a high degree of monetary
non-neutrality in the U.S. economy. These are important results about
fundamental questions in monetary economics, and the paper represents a
significant improvement upon prior methodology.
While Nakamura’s most characteristic contributions have been to
empirical research, her work is always guided by a sophisticated
understanding of the structure of theoretical models, and some of her
contributions are primarily theoretical. An important example is her
paper “The Power of Forward Guidance Revisited” (AER 2016, with
Steinsson and Alisdair McKay). This paper addresses a question about
monetary policy that has been a focus of considerable interest in light
of central-bank responses to the recent financial crisis both in the US
and elsewhere, namely, the extent to which central-bank commitments
about future policy (possibly indicating that interest rates should
remain at their current level for years into the future) can be an
effective way of influencing financial conditions and stimulating
aggregate demand, even in the absence of any change in the current level
of short-term interest rates.
Simple New Keynesian DSGE models imply that advance commitments to
maintain a highly accommodative policy in the future should have a
substantial stimulative effect; in fact, in the case of a commitment to
low interest rates extending several years into the future, the models
predict an immediate effect on both economic activity and inflation that
is so strong as to make it difficult to regard this as a realistic
prediction—and one that is certainly not consistent with the more modest
effects of actual experiments with forward guidance. This has been
called “the forward guidance puzzle.” Nakamura and her co-authors argue
that the unrealistic implication of the simple New Keynesian models
results from the feature that each agent has a single intertemporal
budget constraint, as a result of assuming complete financial markets
and no borrowing constraints. They analyze the effects of a long-horizon
commitment to a fixed nominal interest rate in a model that instead
allows for the existence of uninsurable income risk and borrowing
constraints and find that while the effects of expectations about
monetary policy at shorter horizons are similar to those predicted by
the simpler model, the predicted effects of a long-lasting commitment to
a fixed nominal interest rate are much weaker. Essentially, they find
that in the case of a household with a significant probability of having
a point in time over the next several quarters at which its borrowing
constraint binds, expectations about monetary policy farther in the
future than the time at which the constraint binds do not affect its
current ability to spend, and this substantially reduces the predicted
effects on current aggregate demand of commitments about policy years in
the future.
Their alternative model thus implies that forward guidance is a less
powerful tool for getting out of a sharp contraction than simpler models
would imply, though it hardly implies that it is irrelevant. The paper
is both a contribution to an important policy debate and a useful
methodological contribution to the literature on the application of New
Keynesian models to assess alternative monetary policies. It has
stimulated an active recent literature on “heterogeneous-agent New
Keynesian models,” which explores the implications for other aspects of
macroeconomic dynamics of introducing income heterogeneity and borrowing
constraints.
Nakamura has recently published a JEP article on
“Identification in Macroeconomics,” with Steinsson and a new working
paper on the role of women’s labor force participation in the slow
recovery from recessions observed over the last few decades. The former
is an interesting generalization of the approach discussed above in her
fiscal policy paper and also in the price-setting papers: using
cross-section variation to identify macroeconomic phenomena and
disciplining the aggregate implications with careful structural
modeling. This approach is common to several of Nakamura’s most
influential papers and is methodologically eclectic. It takes advantage
of advances in the availability of new and larger data sets to explore
cross-section variation, while also recognizing that this alone does not
deliver the macroeconomic implications that are of interest to her.
The macro implications require modeling of aggregation that takes into
account the heterogeneity in the micro data, and equilibrium
considerations. Moreover, the macro models have implications for the
cross section that are testable and provide additional discipline and
ability to distinguish competing macro hypotheses. This approach has
also been applied in several of her recent papers on the wealth effect
from housing, delivering significantly different implications from work
focusing only on the micro data.
The working paper “Women, Wealth Effects, and Slow Recoveries” (with
Fukui and Steinsson) on slow recoveries from business cycle downturns
documents that the slow recovery phenomenon coincides with the
convergence of female’s labor force participation to that of males.
That is, as female labor force participation rose during the mid and
late-20th century, employment recovered quickly from downturns as women
entered the labor force in higher numbers during recoveries. However,
as female labor force participation has risen and converged towards
men’s, that dynamic has faded. The paper argues that this effect alone
accounts for 70 percent of the slowing of economic recoveries. This is
an interesting “opposite number” of another labor market finding: that
firms adjust faster during downturns, as they adjust to long-run trends
more when they are firing. This result suggests a similar finding
during upturns, when there is capacity to draw new workers into the
labor market.
Prior recognition for Nakamura’s accomplishments includes a CAREER
Award from the NSF (2011), a Sloan Research Fellowship (2014), the
Elaine Bennett Research Prize from the AEA (2014), being named a member
of “Generation Next: Top 25 Economists Under 45” by the IMF (2014), and
being named one of the decade’s top eight young economists by the
Economist (2018). She serves as a Co-editor of the AER, on the CBO’s
Panel of Economic Advisers, the AEA Committee on National Statistics,
and the BLS Technical Advisory Committee; these appointments testify to
the role she has quickly gained in the profession as an expert on issues
relating to data construction. Her contributions to the general
methodology of empirical macroeconomics, and to the empirical basis for
analyses of the effects of monetary and fiscal policies, make Emi
Nakamura an outstanding candidate for this year’s John Bates Clark
Medal.
-https://www.aeaweb.org/about-aea/honors-awards/bates-clark/emi-nakamura?fbclid=IwAR1WVQjfH03ifcCl6wbwSzx3Y3WligxX2lbOz-90w1xdAY1HG0pxdtEXSQs
Premio a la Macroeconomía joven: Emi Nakamura galardonada con la Clark Medal 2019
Juan Francisco JimenoLa American Economic Association (AEA) premia con la John Bates Clark Medal a economistas menores de 40 años que hayan hecho una contribución relevante al pensamiento y al conocimiento económicos. Creado en 1947, este reconocimiento se concedió cada dos años hasta 2010 y anualmente desde entonces. Se trata del premio para economistas jóvenes de mayor prestigio y se considera una antesala del Premio Nobel de Economía.
En otras entradas (por ejemplo, aquí y aquí) hemos presentado a ganadores de ediciones anteriores de la Clark Medal. En esta ocasión, la galardonada es Emi Nakamura, Ph.D. por Harvard University y, en la actualidad, Chancellor’s Professor of Economics en la Universidad de California, Berkely. Emi es la primera macroeconomista (y la cuarta mujer tras Susan Athey, Esther Duflo y Amy Finkelstein, en 2007, 2010 y 2012 respectivamente) que recibe este galardón.
Se trata de una elección muy reveladora, en primer lugar, por concederse tras un largo periodo en el campo de la macroeconomía tradicional (el antecedente más cercano es 1993), donde la presencia de mujeres es muy reducida (probablemente, la menor entre todos los campos de la economía). Y en segundo lugar, cuando escuchamos en demasiadas ocasiones que la Macroeconomía ha quedado desacreditada por su incapacidad de anticipar y gestionar la última crisis, la AEA señala con este premio que en dicho campo “están pasando cosas” y que allí el conocimiento económico también progresa.
Es habitual escuchar que “lo que los economistas saben de verdad es
Microeconomía, pero lo que les gustaría saber es Macroeconomía”. Pues
bien, Emi nos ha enseñado varias cosas sobre las causas de las
fluctuaciones económicas y la relevancia del modelo neokeynesiano para
entenderlas. Para apreciar sus contribuciones, conviene contextualizar
la situación de la macro en relación con estas cuestiones.
Se suele atribuir la paternidad de la macroeconomía moderna a John Maynard Keynes.
Sin embargo, buena parte de la investigación macroeconómica en la
actualidad se realiza con el llamado modelo neokeynesiano que, en
realidad, debe más a Ragnar Frisch
que a Keynes. La inmensa mayoría de las versiones de este modelo son
dinámicas y se basan en el paradigma impulso-propagación propuesto por
Frisch. Dicho paradigma concibe las fluctuaciones económicas como el
resultado de perturbaciones exógenas (sobre preferencias de los agentes,
tecnológicas, asociadas a las políticas económicas) que se transmiten
generando variaciones en las variables macroeconómicas en función de las
características estructurales de la economía.
Las reminiscencias de Keynes en el modelo neokeynesiano se limitan a
suponer que entre dichas características estructurales que determinan
los efectos de perturbaciones económicas la más fundamental es la
derivada de las rigideces nominales de precios y salarios. La
cuestión prioritaria es, por tanto, comprender cómo, cuándo, por qué y
cuánto ajustan las empresas los precios de sus bienes y servicios y los
salarios de sus trabajadores ante determinadas perturbaciones
económicas.
Es sobre esta cuestión donde Emi Nakamura ha hecho sus contribuciones
más importantes. Ante la insatisfacción sobre cómo los modelos
macroeconómicos introducían las causas de las rigideces nominales de
precios y salarios (costes de menú, “precios a la Calvo”,
etc.), Emi tomó el camino más difícil, pero también el correcto:
construyó bases de datos microeconómicos que informan de la frecuencia,
magnitud y timing con el que las empresas cambian sus precios y
las analizó con solvencia estadística y profundo conocimiento de las
cuestiones teóricas a las que hay que dar respuesta. (Tan importante es
reconocer lo que dicen los datos como reconocer qué cosas de las que
dicen los datos son relevantes y por qué lo son). Entre sus primeros
trabajos, destacan uno sobre la dinámica de la fijación de precios (presentado en una conferencia organizada por el Banco de España cuando todavía era estudiante de doctorado) y, sobre todo, el publicado en el Quarterly Journal of Economics
en 2008, también parte de su tesis doctoral, que pronto se convirtió en
la referencia para contrastar si una teoría de determinación de precios
es coherente con lo observado en la realidad. Y dicha coherencia es
especialmente importante en un momento como el actual en el que reina el
desconcierto, incluso entre los propios bancos centrales, acerca de los
factores que explican el comportamiento agregado de la inflación (como
explicamos aquí).
Pero sus contribuciones no se limitan al análisis de las rigideces
nominales de precios y a la introducción de nuevos enfoques
metodológicos en la investigación en Macroeconomía. Más recientemente,
Emi ha realizado aportaciones muy interesantes y relevantes sobre, por
ejemplo, la identificación de perturbaciones de gasto público y de los
multiplicadores fiscales asociados a ellas (aquí),
sobre por qué los anuncios de tipos de interés futuros por los bancos
centrales pueden no ser instrumentos tan eficaces de la política
monetaria como se deduce del modelo neokeynesiano (aquí) o sobre cómo mejorar la identificación de modelos macroeconómicos (aquí) para importar la llamada "revolución de la credibilidad" también a este campo.
Así pues, Emi se ha ganado una posición destacada entre los
macroeconomistas que han descubierto la importancia de los datos
microeconómicos y de la heterogeneidad en las decisiones de los agentes
económicos a la hora de construir teorías y realizar análisis
macroeconómicos rigurosos. En definitiva, se trata de un premio a la
macroeconomía joven (y en femenino) muy merecido y que, sin duda, no
será más que un aviso de lo que todavía está por venir.
-
La esencia de la macro es el análisis de equilibrio general que,
difícilmente, pueden ser identificados con técnicas experimentales o
cuasi-experimentales. Creo que hay más posibilidades en la
identificación de respuestas a shocks estructurales con el uso cada vez
más extensivo e intensivo de datos micro. Esto es lo que dicen, creo que
acertadamente, Nakamura y Steinson:
"We use the term “identified moments” as a short-hand for “estimates
of responses to identified structural shocks,” or what applied
microeconomists would call “causal effects”. We argue that such
identified moments are often powerful diagnostic tools for
distinguishing between important classes of models (and thereby learning
about the effects of policy). To illustrate these notions we discuss
the growing use of cross-sectional evidence in macroeconomics and
consider what the best existing evidence is on the effects of monetary
policy."
-http://nadaesgratis.es/juan-francisco-jimeno/premio-a-la-macroeconomia-joven-emi-nakamura-ganadora-de-la-clark-medal-2019
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