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Professor Dr Mathias Trabandt

Professor Dr Mathias Trabandt
Current Position

since 4/17

Research Fellow Department of Macroeconomics

Halle Institute for Economic Research (IWH) – Member of the Leibniz Association

since 4/21

Professor of Macroeconomics

Goethe University Frankfurt

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Research Interests
  • macroeconomics
  • monetary economics
  • epidemics

Mathias Trabandt joined the Department of Macroeconomics as a Research Fellow in April 2017. His research focuses on macroeconomics, monetary economics, public economics, labour economics, international macroeconomics, financial frictions, applied econometrics, and epidemics.

Before joining Goethe University Frankfurt, Mathias Trabandt was a Professor at Freie Universität Berlin. Earlier in his career, Mathias Trabandt was Chief of the "Global Modeling Studies Section" at the International Finance Division of the Federal Reserve Board of Governors in Washington D.C. and held positions as an economist at the European Central Bank, Deutsche Bundesbank and Sveriges Riksbank.

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Professor Dr Mathias Trabandt
Professor Dr Mathias Trabandt
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Publications

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Understanding Post-Covid Inflation Dynamics

Martín Harding Jesper Lindé Mathias Trabandt

in: Journal of Monetary Economics, forthcoming

Abstract

We propose a macroeconomic model with a nonlinear Phillips curve that has a flat slope when inflationary pressures are subdued and steepens when inflationary pressures are elevated. The nonlinear Phillips curve in our model arises due to a quasi-kinked demand schedule for goods produced by firms. Our model can jointly account for the modest decline in inflation during the Great Recession and the surge in inflation during the post-COVID period. Because our model implies a stronger transmission of shocks when inflation is high, it generates conditional heteroskedasticity in inflation and inflation risk. Hence, our model can generate more sizeable inflation surges due to cost-push and demand shocks than a standard linearized model. Finally, our model implies that the central bank faces a more severe trade-off between inflation and output stabilization when inflation is elevated.

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Epidemics in the New Keynesian Model

Martin S. Eichenbaum Sergio Rebelo Mathias Trabandt

in: Journal of Economic Dynamics and Control, July 2022

Abstract

This paper documents the behavior of key macro aggregates in the wake of the Covid epidemic. We show that a unique feature of the Covid recession is that the peak-to-trough decline is roughly the same for consumption, investment, and output. In contrast to the 2008 recession, there was only a short-lived rise in financial stress that quickly subsided. Finally, there was mild deflation between the peak and the trough of the Covid recession. We argue that a New Keynesian model that explicitly incorporates epidemic dynamics captures these qualitative features of the Covid recession. A key feature of the model is that Covid acts like a negative shock to the demand for consumption and the supply of labor.

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The Macroeconomics of Testing and Quarantining

Martin S. Eichenbaum Sergio Rebelo Mathias Trabandt

in: Journal of Economic Dynamics and Control, May 2022

Abstract

We develop a SIR-based macroeconomic model to study the impact of testing/ quarantining and social distancing/mask use on health and economic outcomes. These policies can dramatically reduce the costs of an epidemic. Absent testing/quarantining, the main effect of social distancing and mask use on health outcomes is to delay, rather than reduce, epidemic-related deaths. Social distancing and mask use reduce the severity of the epidemic-related recession but prolong its duration. There is an important synergy between social distancing and mask use and testing/quarantining. Social distancing and mask use buy time for testing and quarantining to come to the rescue. The benefits of testing/quarantining are even larger when people can get reinfected, either because the virus mutates or immunity is temporary.

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Working Papers

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Expectations, Infections, and Economic Activity

Martin S. Eichenbaum Miguel Godinho de Matos Francisco Lima Sergio Rebelo Mathias Trabandt

in: NBER Working Paper, No. 27988, April 2022

Abstract

The Covid epidemic had a large impact on economic activity. In contrast, the dramatic decline in mortality from infectious diseases over the past 120 years had a small economic impact. We argue that people's response to successive Covid waves helps reconcile these two findings. Our analysis uses a unique administrative data set with anonymized monthly expenditures at the individual level that covers the first three Covid waves. Consumer expenditures fell by about the same amount in the first and third waves, even though the risk of getting infected was larger in the third wave. We find that people had pessimistic prior beliefs about the case-fatality rates that converged over time to the true case-fatality rates. Using a model where Covid is endemic, we show that the impact of Covid is small when people know the true case-fatality rate but large when people have empirically-plausible pessimistic prior beliefs about the case-fatality rate. These results reconcile the large economic impact of Covid with the small effect of the secular decline in mortality from infectious diseases estimated in the literature.

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