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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

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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The Macroeconomics of Epidemics

Martin S. Eichenbaum Sergio Rebelo Mathias Trabandt

in: Review of Financial Studies, forthcoming

Abstract

We extend the canonical epidemiology model to study the interaction between economic decisions and epidemics. Our model implies that people cut back on consumption and work to reduce the chances of being infected. These decisions reduce the severity of the epidemic but exacerbate the size of the associated recession. The competitive equilibrium is not socially optimal because infected people do not fully internalize the effect of their economic decisions on the spread of the virus. In our benchmark model, the best simple containment policy increases the severity of the recession but saves roughly half a million lives in the United States.

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Why is Unemployment so Countercyclical?

Lawrence J. Christiano Martin S. Eichenbaum Mathias Trabandt

in: Review of Economic Dynamics, July 2021

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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Involuntary Unemployment and the Business Cycle

Lawrence J. Christiano Mathias Trabandt Karl Walentin

in: Review of Economic Dynamics, January 2021

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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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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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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