Jean Flemming
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Macro-Prudential Taxation in Good Times

(with Jean-Paul L'Huillier and Facundo Piguillem)

Journal of International Economics 121 (2019), 103251
Replication Files
Abstract: We analyze the optimal macroprudential policy under the presence of persistent permanent shocks, which convey information about future growth. In this context, crises are characterized by long periods with positive shocks that eventually revert, rendering the collateral constraint binding and triggering deleveraging. In this environment it is optimal to tax borrowing during good times, and let agents act freely leaving the allocations undistorted, including borrowing and lending, when the economy reverts to a bad state. We contrast our findings to the case of standard shocks to the level of income, where it is optimal to tax debt in bad times, when agents need to borrow the most for precautionary savings motives. Also, taxes are used much less often and are around one-tenth of those under level shocks.
Working Papers

Costly Commuting and the Job Ladder

R&R, American Economic Review
    Abstract: I show empirically that commuting time affects job acceptance, suggesting large indirect costs of traffic congestion. To quantify congestion’s effect on the labor market, I build a model of frictional job search within a metropolitan area. Workers evaluate job offers based on productivity and commuting costs, taking congestion as given, but by accepting and commuting to distant jobs, affect others’ labor market outcomes. Equilibrium employment transitions and wages are tightly linked to congestion. Calibrating the model to the London area, the congestion externality significantly decreases welfare and increases wage inequality. I show that the stronger are search frictions, the smaller are the welfare gains from a congestion tax.

Skill Accumulation In The Market and At Home

R&R, Journal of Economic Theory (2nd Round)
Online Appendix
    Abstract: An evolving outside option is introduced into a stochastic directed search model with skill loss during non-employment. Using multi-spell data from the SIPP, I show that average reemployment wages are only mildly sensitive to unemployment duration while the job finding probability is highly sensitive to duration, with evidence of true duration dependence in both variables. Though untargeted, the model produces a quantitatively accurate decline in the job finding probability and starting wage, improving over a model with a fixed outside option. The addition of aggregate shocks leads to an nonlinear response of the unemployment and participation rates during and after recessions, with more severe recessions resulting in stronger hysteresis.

Global Demand for Basket-Backed Stablecoins

(with Garth Baughman)

    Abstract: We develop a model where persistent trade shocks create demand for a basket-backed stablecoin, such as Mark Carney's "synthetic hegemonic currency'' or Facebook's recent proposal for Libra. In numerical simulations, we find four main results. First, because of general equilibrium effects of the basket currency, overall demand for that currency is small. Second, despite scant holdings of the basket, its global reach contributes to substantial increases in welfare. Third, we calculate the welfare maximizing composition of the basket, finding that optimal weights depend on the pattern of international acceptance, but that basket composition does not significantly affect welfare. Fourth, despite potential welfare improvements, low demand for the basket currency from buyers limits sellers' incentives to invest in accepting it, suggesting that fears of a threat to dollar dominance by so-called global stablecoins may be misplaced.

Work In Progress

Optimal Insurance Against Long-Term Consequences of Job Loss

(with Javier Fernandez-Blanco)


Household Inequality and Firm Savings

(with Marco Casiraghi and Facundo Piguillem)


Macro-Prudential Policy with Many Assets

(with Juan Passadore and Facundo Piguillem)