Taewon Hwang

This paper shows that the macroeconomic effects of downward nominal wage rigidity (DNWR) at the zero lower bound (ZLB) depend critically on monetary-policy history dependence. In a New Keynesian model with occasionally binding ZLB and DNWR constraints, wage rigidity operates through two opposing forces. By limiting the decline in marginal cost and inflation while the ZLB binds, DNWR lowers the real interest rate and stabilises demand. Under history-dependent policy, however, the smaller inflation or price-level shortfall also reduces the future accommodation that agents expect, weakening the expectations channel that supports demand at the ZLB. We show analytically that this second force reverses the output effect of DNWR once policy is sufficiently history-dependent. In the quantitative model, the reversal occurs at interior degrees of history dependence and is robust to alternative calibrations. Under current inflation targeting DNWR mitigates the recession, whereas under sufficiently history-dependent average inflation targeting and price-level targeting it amplifies the contraction. The same mechanism operates under Ramsey-optimal policy, where DNWR weakens the low-for-long accommodation that supports expected inflation and current demand.

Large-scale environmental infrastructure investments are often criticized as costly, yet are often used as place-based policies to generate local employment during recessions. This paper estimates the local labor-market effects of the Clean Water Act (CWA) Construction Grants Program using a county-level staggered difference-in-differences design exploiting variation in the timing of first grant-assisted construction starts. Initiating construction raises construction employment by approximately twenty jobs per county-year over the first two post-treatment years, with accompanying increases in establishments and wages. Effects are substantially larger in counties with greater pre-existing labor-market slack and among counties entering the program during its earlier, more intensive years. Evidence of broader effects is less precise, with suggestive responses in non-construction employment and per-capita personal income. Overall, the results show that federally financed wastewater infrastructure generates measurable short-run labor demand during implementation, with the magnitude of the employment response depending importantly on local labor-market conditions.

2026 UCOWR/NIWR Annual Water Resources Conference · Third place, student oral presentation award

We study how households update their beliefs about the economic effects of tariffs following the April 2, 2025, policy announcement (“Liberation Day”). Using experimental evidence, we document substantial disagreement in subjective economic models—driven primarily by political affiliation rather than demographic characteristics. Providing politically neutral, research-based information leads to changes in expectations: information about the near-complete pass-through of tariffs to consumer prices induces upward revisions in inflation expectations, particularly among Democrats, while information on the employment effects of tariffs leads to increased unemployment expectations, mainly among Republicans. Despite these revisions in macroeconomic beliefs, support for the administration’s economic policy remains unchanged. Our findings highlight the role of partisan alignment in shaping responses to policy announcements and new information.

Yonsei University*, KDI*, Bank of Korea*, Texas A&M University*, CEPR*, NTxEC 2025

* Coauthor presentations

Holding stock investments can incentivize households to monitor monetary announcements due to their impact on stock prices. This study examines how stock-investing households adjust their inflation expectations in response to monetary shocks. Using individual-level survey data from the U.S., I find that investors raise their short-term inflation expectations following a monetary expansion, in contrast to non-investing households. Additionally, investor households increase their non-durable consumption after an expansionary shock, unlike non-investors. These findings indicate that holding stock investments motivate households to adjust their expectations and consumption in response to monetary policy shocks, aligned with its intended effects.

MEG 2024, SNDE 2025, Texas A&M Macro Mini-Conference 2025 (poster)