Working Papers



Fiscal Policy and Sentiments in a Monetary Union

Members of a monetary union have limited control over monetary policy. This can elevate the role of fiscal policy as the primary macroeconomic tool against country-specific shocks. This paper argues that there is an additional channel of transmission of fiscal policy in countries within a union via consumer sentiments. Using data for the European Economic and Monetary union, I provide evidence that the sentiments channel for fiscal policy is strongly present in some European countries but the effect is heterogeneous across countries. The strong response of sentiments to fiscal news makes fiscal consolidation more costly in relatively high debt euro area countries.



Stock Returns of Federal Reserve Officials (with Cody Couture)

This paper examines the trading behavior of members of the Federal Reserve's Federal Open Market Committee (FOMC). First, we calculate the financial market returns of FOMC members relative to the overall market and examine if there is any evidence of abnormal returns. Second, we test whether FOMC members exhibit evidence of market timing around monetary policy announcements. We do not find any evidence that FOMC officials select securities that earn abnormal returns. However, our results regarding market timing are mixed. Though we do not find any evidence of security selection or portfolio rebalancing with respect to monetary policy decisions, we do find that stock sales by FOMC officials are typically succeeded by negative returns in the overall stock market.



Partisan Trust in the Federal Reserve (with Carola Binder and Cody Couture)

(Media Coverage: NPR)
This paper examines partisanship in public perceptions of the Federal Reserve. In all years from 2001 through 2023, trust in the Federal Reserve was highest for respondents of the same party as the President. The partisan effects were larger than other demographic differences in trust, but do not explain the large partisan gap in inflation expectations in those years. We conducted a new survey-based information experiment before and after the Presidential inauguration in 2025, and found a changed pattern: Republicans continued to have lower trust in the Fed than did Democrats, even after a Republican President was elected and took office. Yet, Republicans had much lower inflation expectations than Democrats. Responses to open-ended survey questions point to tariffs and President Trump himself as most salient to consumers when considering how inflation will evolve.

Policy Papers


Floods, Droughts, and Inflation Expectations (with Vinod Dharmarajan)

This paper examines whether precipitation related natural disasters like floods and droughts affect inflation expectations of consumers. We exploit variation in the frequency of floods and droughts related disasters across Indian states to understand whether climatic shocks can explain variations in expectation formation process of households. Using data from Reserve Bank of India's inflation expectations survey, we find that, on average, an additional flood event in past three months within a state raises households' short term (three month ahead) inflation expectations by 6.7%. An additional drought event raises the short term inflation expectations by 5.2%. Floods and droughts also affect the second moment by raising dispersion of expectations, especially for the one-year ahead inflation. Our findings highlight the increasing risk of unanchored inflation expectations, which can impede the effectiveness of monetary policy, in a world with increasing climatic events.