Research

Working Papers

• The Role of Risk-Sharing in Attenuating Business Cycles Within Currency Unions
  with Christian Proebsting
  Slides
  

  Best paper prize RES PhD Conference 2024

  Abstract

  How does risk sharing across member states lower the cost of being in a currency union? We decompose the response of risk sharing to state-specific income fluctuations into two components: the direct response of consumption to income changes and the indirect feedback of the shock to income via general equilibrium effects. Risk sharing not only directly smooths consumption but also reduces the volatility of income by stabilizing demand. We estimate both direct and indirect effects by exploiting regional variation in military buildups across U.S. states. A $1 increase in external demand raises state-level income by $1.43, with 47% of this increase passed through to consumption. We rationalize these findings using a small open economy model that incorporates multiple risk-sharing channels. The model allows us to perform policy counterfactuals, showing that risk sharing between U.S. states reduces state-level consumption volatility by a factor of 3.5, with indirect effects accounting for 40% of this reduction. These results imply that the benefits of risk sharing are 40% larger than previously estimated.
  Presentations (including scheduled)

  • 2023:
    • KU Leuven macro seminar (Leuven, Belgium)
    • KOF-ETH Zürich-University of Zurich* (Zurich, Switzerland)
  • 2024:
    • KU Leuven macro seminar (Leuven, Belgium)
    • 13th PhD Student Conference in International Macroeconomics (Paris, France)
    • Ghent University Workshop on Empirical Macroeconomics (Ghent, Belgium; poster)
    • IAAE 2024 (Thessaloniki, Greece)
    • University of Nottingham* (Nottingham, UK)
    • RES PhD Conference 2024 (Portsmouth, UK)
  • 2025:
    • 18th RGS Doctoral Conference (Dortmund, Germany)
    • T2M (CREST, France)

  * Denotes presentations made by co-author.

Work in Progress

• Regional Business Cycles and their Impact on Aggregate Fluctuations
  
  Abstract

  Economic fluctuations are a recurring problem for economists and policymakers. Still, our understanding of the sources driving these economic fluctuations remains incomplete. Traditionally, business cycles are studied at the national level. But recently, the literature has pointed out strong regional disparities over the business cycle, putting forward the hypothesis that a large share of the national economic fluctuations we observe at the national level might originate at the regional level and propagate through the network structure of the economy. My research studies this hypothesis by exploiting novel granular data and state-of-the-art macro models. It proceeds in three steps: First, I construct a dataset of regional business cycle indicators and compare their statistical properties to those found at the national level. Second, I study how regions respond to a specific driver of business cycles: sudden changes in global demand for their products. Third, informed by my empirical estimates I set up a multi-region, currency union model to aggregate my regional estimates and quantify the share of aggregate fluctuations that is driven by regional fluctuations. The model is then used to derive policy implications for both the United States and Europe.