Jean Flemming
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Macro-Prudential Taxation in Good Times

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

Journal of International Economics, vol. 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.

Skill Accumulation In The Market and At Home

Journal of Economic Theory, vol. 189 (2020), 105099
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)

Forthcoming, Review of Economic Dynamics
Abstract: We construct a model where a basket-backed stablecoin -- a currency backed by and pegged to a combination of sovereign currencies, such as Mark Carney's ``synthetic hegemonic currency'' or Facebook's proposal for Libra -- is demanded for transaction purposes. In the model, demand for the basket derives from trade shocks which affect demand for the underlying sovereign currencies. Despite providing a justification for the basket, our model, in numerical simulations, predicts that overall demand for the basket will be low. This derives from a general-equilibrium effect of the basket currency: Demand for the basket creates pass-through demand for the underlying currencies that back it. This pass-through demand stabilizes the value of the currency for which the basket was meant to substitute, limiting demand for the basket. We calculate that this low demand from buyers would likely limit adoption by sellers. Further, we show that agents in the economy disagree about the optimal basket composition, but its welfare impacts are small.
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.

Work In Progress

Distributed Ledger Technologies and Digital Assets

(with David Rappoport)


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)