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 8/15

Professor of Macroeconomics

Freie Universität Berlin

Research Interests

  • applied econometrics
  • labour economics
  • international macroeconomics

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, and applied econometrics.

Mathias Trabandt is Professor of Macroeconomics at the School of Business and Economics at Freie Universität Berlin since August 2015. Prior to that, he was Chief of the “Global Modeling Studies Section” at the International Finance Division of the Federal Reserve Board of Governors in Washington D.C. Earlier in his career, Mathias Trabandt also held positions as an economist at the European Central Bank, Deutsche Bundesbank, and at Sveriges Riksbank.

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Professor Dr Mathias Trabandt
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Publications

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Involuntary Unemployment and the Business Cycle

Lawrence J. Christiano Mathias Trabandt Karl Walentin

in: Review of Economic Dynamics, forthcoming

Abstract

Can a model with limited labor market insurance explain standard macro and labor market data jointly? We construct a monetary model in which: i) the unemployed are worse off than the employed, i.e. unemployment is involuntary and ii) the labor force participation rate varies with the business cycle. To illustrate key features of our model, we start with the simplest possible framework. We then integrate the model into a medium-sized DSGE model and show that the resulting model does as well as existing models at accounting for the response of standard macroeconomic variables to monetary policy shocks and two technology shocks. In addition, the model does well at accounting for the response of the labor force and unemployment rate to these three shocks.

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Should We Use Linearized Models To Calculate Fiscal Multipliers?

Jesper Lindé Mathias Trabandt

in: Journal of Applied Econometrics, No. 7, 2018

Abstract

We calculate the magnitude of the government consumption multiplier in linearized and nonlinear solutions of a New Keynesian model at the zero lower bound. Importantly, the model is amended with real rigidities to simultaneously account for the macroeconomic evidence of a low Phillips curve slope and the microeconomic evidence of frequent price changes. We show that the nonlinear solution is associated with a much smaller multiplier than the linearized solution in long-lived liquidity traps, and pin down the key features in the model which account for the di¤erence. Our results caution against the common practice of using linearized models to calculate scal multipliers in long-lived liquidity traps.

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On DSGE Models

Lawrence J. Christiano Martin S. Eichenbaum Mathias Trabandt

in: Journal of Economic Perspectives, No. 3, 2018

Abstract

The outcome of any important macroeconomic policy change is the net effect of forces operating on different parts of the economy. A central challenge facing policymakers is how to assess the relative strength of those forces. Economists have a range of tools that can be used to make such assessments. Dynamic stochastic general equilibrium (DSGE) models are the leading tool for making such assessments in an open and transparent manner. We review the state of mainstream DSGE models before the financial crisis and the Great Recession. We then describe how DSGE models are estimated and evaluated. We address the question of why DSGE modelers—like most other economists and policymakers—failed to predict the financial crisis and the Great Recession, and how DSGE modelers responded to the financial crisis and its aftermath. We discuss how current DSGE models are actually used by policymakers. We then provide a brief response to some criticisms of DSGE models, with special emphasis on criticism by Joseph Stiglitz, and offer some concluding remarks.

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Working Papers

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Epidemics in the Neoclassical and New Keynesian Models

Martin S. Eichenbaum Sergio Rebelo Mathias Trabandt

in: NBER Working Paper, No. 27430, 2020

Abstract

We analyze the effects of an epidemic in three standard macroeconomic models. We find that the neoclassical model does not rationalize the positive comovement of consumption and investment observed in recessions associated with an epidemic. Introducing monopolistic competition into the neoclassical model remedies this shortcoming even when prices are completely flexible. Finally, sticky prices lead to a larger recession but do not fundamentally alter the predictions of the monopolistic competition model.

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Why is Unemployment so Countercyclical?

Lawrence J. Christiano Martin S. Eichenbaum Mathias Trabandt

in: NBER Working Paper No. 26723, 2020

Abstract

We argue that wage inertia plays a pivotal role in allowing empirically plausible variants of the standard search and matching model to account for the large countercyclical response of unemployment to shocks.

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Resolving the Missing Deflation Puzzle

Jesper Lindé Mathias Trabandt

in: CEPR Discussion Papers 13690, 2019

Abstract

We propose a resolution of the missing deflation puzzle. Our resolution stresses the importance of nonlinearities in price- and wage-setting when the economy is exposed to large shocks. We show that a nonlinear macroeconomic model with real rigidities resolves the missing deflation puzzle, while a linearized version of the same underlying nonlinear model fails to do so. In addition, our nonlinear model reproduces the skewness of inflation and other macroeconomic variables observed in post-war U.S. data. All told, our results caution against the common practice of using linearized models to study inflation and output dynamics.

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