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The Regional Economics Applications Laboratory
Announces a Seminar by:

Marcelo S. Bego [1]

EAESP – FGV
Fundação Getúlio Vargas, Brazil

 "Searching to Hedge"
 

João B. Duarte [2]

Department of Economics
University of Illinois at Urbana-Champaign

 "Housing and monetary policy in the business cycle: what do housing rents have to say?"
 

October

28

3:00pm

Davenport Hall

137D

[1]: This paper investigates farmers hedge behavior using an alternative approach based on search models. A theory of hedge behavior is derived and we explore the discrete solution faced by farmers before each harvest period of hedging or not their production. Results using this new approach corroborates prior literature finds and are able to offer new insights, since it shows that the state of nature and farmers profits matter for hedge decision. 

[2]: In this paper we show that housing rents respond positively to a contractionary monetary policy shock. This response is surprising as housing prices, most other prices and output respond negatively.  We propose a DSGE model with housing ownership to explain the empirical findings. The model is calibrated to match long run data moments and is able to provide results that closely match the empirical findings. Counter-factual exercises reveal that CPI dynamics are hard to match without taking rents into consideration and that a monetary policy achieves better outcomes when observing inflation measures which do not include housing rents. Finally, by simulating the model we find that the feedback between inflation measures and monetary policy is greatly responsible for the large price increase in housing preceding the great recession. .
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