Neil Mehrotra

🧵 (1/7) With @knittelmit.bsky.social and @cwolfram.bsky.social, happy to announce our new paper on “Who Bears the Burden of Climate Inaction?”, just posted for BPEA @brookings.edu.

We find large climate cost impacts that vary by both geography and income.

www.brookings.edu/articles/who...

Thanks to @kclausing.bsky.social for the great thread on our BPEA paper with @knittelmit.bsky.social!

Bottom line: US households experience climate change primarily through wildfires and storms more than heat.

Tariffs, Trade Wars, and the Natural Rate of Interest | Federal Reserve Bank of Minneapolis

8/8 Here’s the link to the paper – comments welcome! www.minneapolisfed.org/research/qua...

7/8: In future work, we think understanding the distributional effects of tariffs will be important. The heterogenous agent trade models pioneered by Mike are a good laboratory for this.

6/8: How does what we do differ from the explosion of other work on tariffs? Typical trade models are static and do not focus on either interest rate dynamics or investment. Other work assumes a small open economy (constant world interest rate) and/or excludes investment.

5/8: Our paper discusses some other mechanisms that are not present in our model that may attenuate or reverse our conclusion. For example, to the extent that tariffs lead to reindustrialization, that mechanism could work in the other direction.

4/8: Our quantitative simulations suggest that this effect is sizable: on the order of 25-50 basis points for a 15% tariff:

3/8: We find that both unilateral tariffs and a trade war lower the natural rate of interest in the short run. Tariffs and trade wars lower investment by raising the cost of investment goods. This lower demand for assets lowers interest rates and the return on capital.

2/8: We examine the effects of a unilateral tariffs in a global dynamic heterogenous agent trade model. We’re particularly focused on what happens to the natural rate of interest – the neutral interest rate that a central bank wants to target to keep output at potential.

1/8: Quick thread on a new short paper with Mike Waugh in the latest edition of the Minneapolis Fed Quarterly Review:

Love the DS9 reference!

Imho too much discussion on here about whether the labor market is weak or not given slowdown in labor supply. Too little discussion of how to proceed with downside risks to both sides of the mandate.

The implication is that the rest of the Board is accepting her firing, and that she has been removed. Not good. The better strategy would be to continue work as normal and make Trump get an order removing her.

This climate study made a big error. One piece of data was to blame. Uzbekistan’s erroneous data dramatically changed the results of a study on global climate damages.

TFW no one talked to a macroeconomists at any point from working paper to publication: www.washingtonpost.com/climate-envi...

All the regional presidents are up for reappointment in February 2026 and, even if reappointed, could be removed at any time by the Board of Governors.

What happened to the ~100 billion in rail funding in the Bipartisan Infrastructure Law in 2021? What got built?

Really, I mean if it was 52-48, they would have passed something materially similar.

This is exactly right. Anyone voting for the spending bill is voting for higher energy bills and blackouts.

A sad capitulation from the Timberpuppies. Sigh.

Federal Reserve to slash staff by 10% over several years Chief Jay Powell says US central bank is seeking to ensure it is a ‘responsible steward of public resources’

Federal Reserve to slash staff by 10% over several years

https://www.ft.com/content/927ba69e-3037-4e0f-b9a6-1eeaac8b03b7

Initial claims come in slightly above prior non-recessionary years, both in headcount (1st) & share-of-emp (2nd) terms. Initial claims are ~19K above where they were same week in 2019. Not a catastrophe but it's notable. Continuing claims slightly above recent years too (3rd).

Remarkable how Trump dealt himself the worst possible hand to negotiate w/ China.

1st card: Enacted tariffs that threaten to tank the economy
2nd: Backs China into a corner.
3rd: Makes fed incapable of responding
4th: Tanks markets, bonds and the dollar
5th: no end game, no plan

Greg Gutfield unimpressed by Ernie and company fancy math cc @marthagimbel.bsky.social @ernietedeschi.bsky.social

I suppose it might show up only on the hiring margin, but I would have expected some increase in layoffs in construction, etc. if private investment slows.

Econometrica | Econometric Society Journal | Wiley Online Library Uncertainty appears to jump up after major shocks like the Cuban Missile crisis, the assassination of JFK, the OPEC I oil-price shock, and the 9/11 terrorist attacks. This paper offers a structural f...

Does not really seem consistent with the uncertainty shock literature: onlinelibrary.wiley.com/doi/abs/10.3...

Unchanged jobless claims in the face of multiple standard deviation uncertainty shocks is fairly impressive.

This is wrong - only Chetty is supposed to have access to all these data sets.

Maybe there's an innocuous explanation, but we might be seeing the consequences of squandering our exorbitant privilege in the first 100 days:

Line goes down seems strong evidence in your favor.

A silver lining in this would be if it marks the end of the filibuster. I hope Democrats understand it as such.