Matthias Meier

Welcome!

I am an Assistant Professor at the University of Mannheim and a principal investigator of the Bonn-Mannheim Collaborative Research Center TR 224 funded by the German Research Foundation (DFG). My research interests are Macroeconomics, Monetary Economics, International Economics, and Econometrics.

Curriculum Vitae

Workshop Organization

2024 Workshop on Firm Heterogeneity and Macroeconomics: Call for Papers
2023 Workshop on Firm Heterogeneity and Macroeconomics: Schedule
2022 Workshop on Firm Heterogeneity and Macroeconomics: Schedule
2018 Workshop on Quantitative Macroeconomics: Schedule

Published and Accepted Papers

Monetary Policy, Markup Dispersion, and Aggregate TFP
with Timo Reinelt
Review of Economics and Statistics, 106 (4), pp. 1012–1027, July 2024

Abstract
Motivated by empirical evidence that monetary policy affects aggregate TFP, we study the role of markup dispersion for monetary transmission. Empirically, we show that the response of markup dispersion to monetary policy shocks can account for a significant fraction of the aggregate TFP response in the first two years after the shock. Analytically, we show that heterogeneous price rigidity can explain the response of markup dispersion if firms have a precautionary price setting motive, which is present in common New Keynesian environments. We provide empirical evidence on the relationship between markups and price rigidity in support of this explanation. Finally, we study the mechanism and its implications in a quantitative model.

Abstract

Motivated by empirical evidence that monetary policy affects aggregate TFP, we study the role of markup dispersion for monetary transmission. Empirically, we show that the response of markup dispersion to monetary policy shocks can account for a significant fraction of the aggregate TFP response in the first two years after the shock. Analytically, we show that heterogeneous price rigidity can explain the response of markup dispersion if firms have a precautionary price setting motive, which is present in common New Keynesian environments. We provide empirical evidence on the relationship between markups and price rigidity in support of this explanation. Finally, we study the mechanism and its implications in a quantitative model.

Published Paper Bibtex Working Paper Replication Files
– Lamfalussy Fellowship of the European Central Bank

Labor Market Effects of Monetary Policy Across Workers and Firms
with Andreas Gulyas and Mykola Ryzhenkov
European Economic Review, 166, 104756, July 2024

Abstract
This paper uses Austrian social security records to analyze the effects of ECB monetary policy on the labor market. Our focus is on the role of worker and firm wage-components, defined by an Abowd et al. (1999) wage regression. Our findings show that monetary tightening causes the largest employment losses for low-paid workers who are employed in high-paying firms before the tightening. Monetary tightening further causes a reallocation of workers to lower-paying firms. In particular low-paid workers who were originally employed by low-paying firms are prone to falling down the firm wage ladder.

Abstract

This paper uses Austrian social security records to analyze the effects of ECB monetary policy on the labor market. Our focus is on the role of worker and firm wage-components, defined by an Abowd et al. (1999) wage regression. Our findings show that monetary tightening causes the largest employment losses for low-paid workers who are employed in high-paying firms before the tightening. Monetary tightening further causes a reallocation of workers to lower-paying firms. In particular low-paid workers who were originally employed by low-paying firms are prone to falling down the firm wage ladder.

Published Paper Bibtex Working Paper Replication Files

COVID-19 Supply Chain Disruptions
with Eugenio Pinto
European Economic Review, 162, 104674, February 2024

Abstract
In the early phase of the COVID-19 crisis, China imposed widespread lockdowns to contain the virus. We study the spillovers from the lockdowns to the US economy. We find that sectors with a high exposure to intermediate goods imports from China experienced significantly larger declines in production, employment, imports, and exports. In addition, relative input and output prices increased in these sectors. At the peak of the recession in April 2020, output was 16% lower in sectors with a one standard deviation higher China exposure. The estimated effects on output, input, and inflation are short-lived and dissipate by summer 2020.

Abstract

In the early phase of the COVID-19 crisis, China imposed widespread lockdowns to contain the virus. We study the spillovers from the lockdowns to the US economy. We find that sectors with a high exposure to intermediate goods imports from China experienced significantly larger declines in production, employment, imports, and exports. In addition, relative input and output prices increased in these sectors. At the peak of the recession in April 2020, output was 16% lower in sectors with a one standard deviation higher China exposure. The estimated effects on output, input, and inflation are short-lived and dissipate by summer 2020.

Published Paper Bibtex Working Paper Replication Files

Delta-Method inference for a class of set-identiﬁed SVARs
with Bulat Gafarov and José Luis Montiel Olea
Journal of Econometrics, 203 (2), pp. 316-327, April 2018

Abstract
We study vector autoregressions that impose equality and/or inequality restrictions to set-identify the dynamic responses to a single structural shock. We make three contributions. First, we present an algorithm to compute the largest and smallest value that an impulse-response coefficient can attain over its identified set. Second, we provide conditions under which these largest and smallest values are directionally differentiable functions of the model’s reduced-form parameters. Third, we propose a delta-method approach to conduct inference about the structural impulse-response coefficients. We use our results to assess the effects of the announcement of the Quantitative Easing program in August 2010.

Abstract

We study vector autoregressions that impose equality and/or inequality restrictions to set-identify the dynamic responses to a single structural shock. We make three contributions. First, we present an algorithm to compute the largest and smallest value that an impulse-response coefficient can attain over its identified set. Second, we provide conditions under which these largest and smallest values are directionally differentiable functions of the model’s reduced-form parameters. Third, we propose a delta-method approach to conduct inference about the structural impulse-response coefficients. We use our results to assess the effects of the announcement of the Quantitative Easing program in August 2010.

Published Paper Bibtex Working Paper Toolbox
– Best Paper Award in Applied Economics, Econometric Society European Meeting

Working Papers

Corporate Debt Maturity Matters for Monetary Policy
with Joachim Jungherr, Timo Reinelt and Immo Schott
Review of Economic Studies, revise and resubmit

Abstract
We provide novel empirical evidence that firms’ investment is more responsive to monetary policy when a higher fraction of their debt matures. In a heterogeneous firm New Keynesian model with financial frictions and endogenous debt maturity, two channels explain this finding: (1.) Firms with more maturing debt have larger roll-over needs and are therefore more exposed to fluctuations in the real interest rate (roll-over risk). (2.) These firms also have higher default risk and therefore react more strongly to changes in the real burden of outstanding nominal debt (debt overhang). Unconventional monetary policy, which operates through long-term interest rates, has larger effects on debt maturity but smaller effects on output and inflation than conventional monetary policy.

Abstract

We provide novel empirical evidence that firms’ investment is more responsive to monetary policy when a higher fraction of their debt matures. In a heterogeneous firm New Keynesian model with financial frictions and endogenous debt maturity, two channels explain this finding: (1.) Firms with more maturing debt have larger roll-over needs and are therefore more exposed to fluctuations in the real interest rate (roll-over risk). (2.) These firms also have higher default risk and therefore react more strongly to changes in the real burden of outstanding nominal debt (debt overhang). Unconventional monetary policy, which operates through long-term interest rates, has larger effects on debt maturity but smaller effects on output and inflation than conventional monetary policy.

Working Paper Bibtex

Identification of Systematic Monetary Policy
with Lukas Hack and Klodiana Istrefi
Review of Economic Studies, revise and resubmit

Abstract
We propose a novel identification design to estimate the causal effects of systematic monetary policy on the propagation of macroeconomic shocks. The design combines (i) a time-varying measure of systematic monetary policy based on the historical composition of hawks and doves in the Federal Open Market Committee (FOMC) with (ii) an instrument that leverages the mechanical FOMC rotation of voting rights. We apply our design to study the effects of government spending shocks. We find fiscal multipliers between two and three when the FOMC is dovish and below zero when it is hawkish. Narrative evidence from historical FOMC records corroborates our findings.

Abstract

We propose a novel identification design to estimate the causal effects of systematic monetary policy on the propagation of macroeconomic shocks. The design combines (i) a time-varying measure of systematic monetary policy based on the historical composition of hawks and doves in the Federal Open Market Committee (FOMC) with (ii) an instrument that leverages the mechanical FOMC rotation of voting rights. We apply our design to study the effects of government spending shocks. We find fiscal multipliers between two and three when the FOMC is dovish and below zero when it is hawkish. Narrative evidence from historical FOMC records corroborates our findings.

Working Paper Bibtex
– Non-technical summaries: VoxEU, ECB Research Bulletin, SUERF Policy Brief

The Systematic Origins of Monetary Policy Shocks
with Lukas Hack and Klodiana Istrefi

Abstract
Conventional strategies to identify monetary policy shocks rest on the implicit assumption that systematic monetary policy is constant over time. We formally show that these strategies do not isolate monetary policy shocks in an environment with time-varying systematic monetary policy. Instead, they are contaminated by systematic monetary policy and macroeconomic variables, leading to contamination bias in estimated impulse responses. Empirically, we show that Romer and Romer (2004) monetary policy shocks are indeed predictable by fluctuations in systematic monetary policy. Instead, we propose a new monetary policy shock that is orthogonal to systematic monetary policy. Our shock suggests U.S. monetary policy has shorter lags and stronger effects on inflation and output.

Abstract

Conventional strategies to identify monetary policy shocks rest on the implicit assumption that systematic monetary policy is constant over time. We formally show that these strategies do not isolate monetary policy shocks in an environment with time-varying systematic monetary policy. Instead, they are contaminated by systematic monetary policy and macroeconomic variables, leading to contamination bias in estimated impulse responses. Empirically, we show that Romer and Romer (2004) monetary policy shocks are indeed predictable by fluctuations in systematic monetary policy. Instead, we propose a new monetary policy shock that is orthogonal to systematic monetary policy. Our shock suggests U.S. monetary policy has shorter lags and stronger effects on inflation and output.

Working Paper Bibtex

Capital (Mis)allocation, Incentives and Productivity
with Jan Schymik, Alexander Schramm, Alxander Schwemmer)

Abstract
This paper argues that distorted managerial incentives can be a cause for within-ﬁrm capital misallocation. We document empirically that managers experiencing reductions in long-term incentives reallocate ﬁrm investments towards less durable assets. To quantify this channel of within-ﬁrm misallocation for the US economy, we then develop a model of dynamic ﬁrm investments under agency frictions. In the model, capital misallocation within ﬁrms is caused by short-termist incentives due to a too strong focus on current cash ﬂows implied by equity-bonus contracts. Our results show that short-termist incentives cause substantial wedges in the rates of return across capital goods within ﬁrms, lowering average productivity.

Abstract

This paper argues that distorted managerial incentives can be a cause for within-ﬁrm capital misallocation. We document empirically that managers experiencing reductions in long-term incentives reallocate ﬁrm investments towards less durable assets. To quantify this channel of within-ﬁrm misallocation for the US economy, we then develop a model of dynamic ﬁrm investments under agency frictions. In the model, capital misallocation within ﬁrms is caused by short-termist incentives due to a too strong focus on current cash ﬂows implied by equity-bonus contracts. Our results show that short-termist incentives cause substantial wedges in the rates of return across capital goods within ﬁrms, lowering average productivity.

Working Paper Bibtex

Supply Chain Disruptions, Time to Build and the Business Cycle

Abstract
We provide new evidence that (i) time to build is volatile and countercyclical, and that (ii) supply chain disruptions lengthen time to build. Motivated by these findings, we develop a general equilibrium model in which heterogeneous firms face non-convex adjustment costs and multi-period time to build. In the model, supply chain disruptions lengthen time to build. Calibrating the model to US micro data, we show that disruptions, which lengthen time to build by 1 month, depress GDP by 1% and aggregate TFP by 0.2%. Structural vector autoregressions corroborate the quantitative importance of supply chain disruptions.

Abstract

We provide new evidence that (i) time to build is volatile and countercyclical, and that (ii) supply chain disruptions lengthen time to build. Motivated by these findings, we develop a general equilibrium model in which heterogeneous firms face non-convex adjustment costs and multi-period time to build. In the model, supply chain disruptions lengthen time to build. Calibrating the model to US micro data, we show that disruptions, which lengthen time to build by 1 month, depress GDP by 1% and aggregate TFP by 0.2%. Structural vector autoregressions corroborate the quantitative importance of supply chain disruptions.

Working Paper Bibtex

Do plants freeze upon uncertainty shocks?
with Ariel Mecikovsky

Abstract
What explains the impact of uncertainty shocks on the economy? This paper uses highly disaggregated data on industry-level job flows to investigate the empirical relevance of various transmission channels of uncertainty shocks. The channels we consider are labor adjustment frictions, capital adjustment frictions, nominal ridigities, and financial frictions. For each channel, we derive testable implications regarding the response of job flows to uncertainty shocks. Empirically, uncertainty shocks lead to more job destruction and less job creation in more than 80% of all industries. The effect is significantly stronger in industries that face tighter financial constraints, which supports the financial frictions channel. In contrast, our evidence does not support the other three channels.

Abstract

What explains the impact of uncertainty shocks on the economy? This paper uses highly disaggregated data on industry-level job flows to investigate the empirical relevance of various transmission channels of uncertainty shocks. The channels we consider are labor adjustment frictions, capital adjustment frictions, nominal ridigities, and financial frictions. For each channel, we derive testable implications regarding the response of job flows to uncertainty shocks. Empirically, uncertainty shocks lead to more job destruction and less job creation in more than 80% of all industries. The effect is significantly stronger in industries that face tighter financial constraints, which supports the financial frictions channel. In contrast, our evidence does not support the other three channels.

Working Paper Bibtex
– Best Student Paper Award, Real Options Group Conference
– Best Paper Award (runner-up), Spring Meeting of Young Economists

Misallocation, Markups, and Technology
with Christian Bayer and Ariel Mecikovsky

Abstract
Hsieh and Klenow(2009) shows that misallocation creates large aggregate TFP losses, explains international TFP differences, and can be quantified through factor productivity dispersions. Using micro data from Chile, Colombia, Indonesia, and Germany, we show a substantial correlation in factor productivities across factors and therefore propose to decompose dispersion in factor productivities in dispersion in technology and markup instead. Relative to Germany, misallocation is larger in the developing economies. TFP losses from misallocation are explained to 1/3 by larger technology and to 2/3 by larger markup dispersion. Finally, we discuss market outcomes as potential sources of markup and technology dispersion.

Abstract

Hsieh and Klenow(2009) shows that misallocation creates large aggregate TFP losses, explains international TFP differences, and can be quantified through factor productivity dispersions. Using micro data from Chile, Colombia, Indonesia, and Germany, we show a substantial correlation in factor productivities across factors and therefore propose to decompose dispersion in factor productivities in dispersion in technology and markup instead. Relative to Germany, misallocation is larger in the developing economies. TFP losses from misallocation are explained to 1/3 by larger technology and to 2/3 by larger markup dispersion. Finally, we discuss market outcomes as potential sources of markup and technology dispersion.

Working Paper CEPR Discussion Paper Bibtex
– Best Paper Award (runner-up), European Workshop on Efficiency and Productivity Analysis

Projection inference for set-identiﬁed SVARs
with Bulat Gafarov and José Luis Montiel Olea

Abstract
We study the properties of projection inference for set-identified Structural Vector Autoregressions. A nominal 1−α projection region collects the structural parameters that are compatible with a 1−α Wald ellipsoid for the model’s reduced-form parameters (autoregressive coefficients and the covariance matrix of residuals). We show that projection inference can be applied to a general class of stationary models, is computationally feasible, and - as the sample size grows large — it produces regions that have both frequentist coverage and robust Bayesian credibility of at least 1−α. A drawback of the projection approach is that both coverage and robust credibility may be strictly above their nominal level. Following the recent work of Kaido, Molinari, and Stoye (2016), we ‘calibrate’ the radius of the Wald ellipsoid to guarantee that — for a given posterior on the reduced-form parameters — the projection method produces a region with robust Bayesian credibility of exactly 1−α. We illustrate the main results of the paper using the demand/supply-model for the U.S. labor market in Baumeister and Hamilton(2015).

Abstract

We study the properties of projection inference for set-identified Structural Vector Autoregressions. A nominal 1−α projection region collects the structural parameters that are compatible with a 1−α Wald ellipsoid for the model’s reduced-form parameters (autoregressive coefficients and the covariance matrix of residuals). We show that projection inference can be applied to a general class of stationary models, is computationally feasible, and - as the sample size grows large — it produces regions that have both frequentist coverage and robust Bayesian credibility of at least 1−α. A drawback of the projection approach is that both coverage and robust credibility may be strictly above their nominal level. Following the recent work of Kaido, Molinari, and Stoye (2016), we ‘calibrate’ the radius of the Wald ellipsoid to guarantee that — for a given posterior on the reduced-form parameters — the projection method produces a region with robust Bayesian credibility of exactly 1−α. We illustrate the main results of the paper using the demand/supply-model for the U.S. labor market in Baumeister and Hamilton(2015).

Working Paper Bibtex

Work in Progress

Congestion and Cushion: Evidence from Manufacturing Order Books
with Bjarne Horst and Jan Schymik

– Cooperation with Federal Statistical Office of Germany (Destatis)

The Precautionary Inflation Surge?

with Timo Reinelt and Saten Kumar

FX Interventions
with Hüsnü Dalgic and Patrick Hürtgen