Working papers
New-Keynesian Open-Market Operations: A Reassessment of the Role of Money [Job market paper] (2026).
Abstract
Quantitative New Keynesian models typically abstract from money, on the grounds that it plays no quantitative role in monetary policy transmission or optimal policy. This paper shows that money raises the cost of inflation, with consequences for how monetary policy transmits and for the central bank's reaction function. Empirically, I construct a new series of Federal Reserve permanent open-market operations (OMO) from weekly reports (1979–2008) and show, using high-frequency identified shocks, that OMO respond significantly to interest rate shocks within a month and, contrary to existing evidence, more strongly after the Fed began announcing its target rate. I build a heterogeneous-agent New Keynesian model with corporate debt and cash-in-advance constraints under which the central bank must conduct OMO to enforce its interest-rate target. The calibrated model matches the untargeted OMO response. Relative to a cashless benchmark, investment responds about 30\% more to a rate cut and household savings fall twice as much, because OMO finance investment through an inflation tax that falls hardest on poorer households. With money, deviations from the optimal Taylor rule are an order of magnitude costlier and output stabilization is unambiguously harmful, as consumption and hours respond strongly to inflation and OMO volume. Extensions show that information frictions account for the weaker pre-announcement OMO response, and that the cashless benchmark amplifies shocks through a within-period income–spending feedback loop that a cash-in-advance constraint breaks.The Price of Traceability: E-Payments, Tax Compliance, and Policy [with Burak Uras] (2026).
Abstract
Why do firms continue to rely on cash in economies where digital payments are widespread and electronic transaction costs are low? This paper shows that the answer lies in the interaction between payment technologies and tax enforcement. Using randomized experimental evidence from Kenyan small and medium-sized firms, we establish that the adoption of electronic payments causally increases tax compliance by raising transaction traceability. Moreover, SME survey evidence shows that tax evasion is associated with cash discounts. Motivated by these findings, we develop a microfounded general equilibrium model in which heterogeneous firms choose prices, payment acceptance, and tax evasion jointly. Cash facilitates evasion but exposes buyers to transaction risk, while electronic payments are safer yet traceable by third parties. These trade-offs generate endogenous cash discounts, selective rejection of digital payments, and coexistence of payment instruments in equilibrium. The calibrated model shows that when electronic payments are non–interest-bearing, inflation increases cash usage and tax evasion, overturning the standard prediction that inflation reduces cash use. We characterize the optimal policy mix and show that financial development, enforcement intensity, and inflation are tightly intertwined in maximizing government revenues and welfare.On the Distributional Effects of Monetary Shocks and Market Incompleteness (2025).
Abstract
I study the transmission of distortionary monetary policy shocks under incomplete markets. Using a heterogeneous agents general equilibrium model, I demonstrate that there is a unique fundamental stationary equilibrium, where the distribution of monetary holdings mirrors productivity, but infinite non-fundamental stationary equilibria for a given monetary base in the presence of a frictionless bonds market. Only financially constrained economies return to the fundamental stationary equilibrium after an unforeseeable monetary shock that redistributes monetary holdings, with aggregate effects on output and endogenous price stickiness along the transition. Financially developed economies display smaller distortions and negligible effects on aggregate variables, but monetary shocks create hysteresis by making the consequences of idiosyncratic shocks permanent. While partial market completion enhances welfare by enabling nearly perfect risk sharing, this improvement is limited by the irreversibility of the idiosyncratic shocks. Ultimately, distributional effects are irrelevant for monetary policy transmission to aggregate variables in developed economies but critical in poorer countries.Work in progress
Business Cycles and Informal Hiring with Misallocation of Capital