**Working Paper:**

**Flattening of the Phillips Curve: Causes and Their Policy Implications (Job Market Paper)**

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****Abstract: This paper explores potential causes of the flattening of the Phillips curve and why they matter for monetary policy. I use a novel open economy nested-CES model to show that an increase in product market concentration (Herfindahl-Hirschman Index) and a higher degree of openness to international trade both lead to a flatter Phillips curve. Within the model, the central bank’s optimal policy choices depend separately on these two factors, not just on the resulting slope of the Phillips curve. My model predicts a 30% drop in the slope of the Phillips curve since the 1990s, where the major contribution comes from increases in product market concentration rather than increases in international trade openness. Through a series of policy experiments, I quantitatively show the suboptimality of the choices made by policymakers who are misinformed either about the slope of the Phillips curve or about its causes.

**International Monetary Policy Cooperation: A Dynamic Solution to the Zero Lower Bound**

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Abstract: This paper shows how dynamic cooperation between different central banks can mitigate the adverse impact of the zero lower bound on interest rates. I develop a two country New Keynesian model in which the two central banks simultaneously choose interest rates to maximize domestic welfare. I demonstrate that, under weak conditions, there exists a subgame perfect equilibrium ("cooperative") outcome in this dynamic game in which both countries’ welfare is higher than if the two central banks coordinate on a (“non-cooperative”) outcome in which they ignore the other’s choices. Intuitively, the central bank that is not trapped by the zero lower bound adjusts it interest rate to help its counterpart, and both countries are better off due to the concave welfare function. In a realistic calibration, I validate that the cooperative outcome is subgame perfect. This quantitative result suggests that it may be desirable for central banks to use dynamic cooperation to deal with the zero lower bound.

**Work In Progress:**

**The Effects of Transitory Shocks on Long Bond Returns**

Abstract: I study how transitory shocks affect the forward rates between long term bonds. I find that transitory shocks, which are measured by macroeconomic surprises as in Gürkaynak et al. (2005), have significant effects on the forward rates between very long term government bonds. In particular, a 1% positive shock to GDP increases the forward rate between 20 year and 30 year Treasury bonds by 0.2%. This is not predicted by standard macroeconomic models, which suggest forward rates should only depend on long-run expectations. Several asset pricing models can, however, explain this finding. They uniformly imply that seemingly transitory shocks have significant unexpected and persistent effects.