Papers and Publications

Journal Publications

Out of Bounds: Do SPF Respondents Have Anchored Inflation Expectations? (2023, with Carola Binder and Randal J. Verbrugge) Journal of Money Credit & Banking, 55(2-3), 559-576

Diversification and Stability in Illinois Local Government Revenues (2023, with Justin Marlowe)
Illinois Municipal Policy Journal, 8(1), 61-80

Policy Papers

Forward Guidance during the Pandemic: Has It Changed the Public’s Expectations? (2020, with Chengcheng Jia) Federal Reserve Bank of Cleveland Economic Commentary

The Information Effect of Monetary Policy: Self-Defeating or Optimal? (2020, with Chengcheng Jia) Federal Reserve Bank of Cleveland Economic Commentary

The CPI–PCEPI Inflation Differential: Causes and Prospects (2020, with Carola Binder and Randal J. Verbrugge) Federal Reserve Bank of Cleveland Economic Commentary

Risk-taking by Public Pension Funds. (2018, with Kurt Winkelmann, Jordan Pandolfo, and Matthew Murphy) Heller-Hurwicz Economics Institute Policy Brief

Works In Progress

Portfolio Theory and Municipal Revenue: Service Structures and Risk Asymmetry (In Progress, with Justin Marlowe, Nathan Grasse, and Elizabeth Searing)
Summary: Municipal governments provide services, and revenue management provides funds for these activities. The conventional wisdom regarding revenue management holds that diversification is beneficial. This notion is based on modern portfolio theory (MPT), originally developed to identify the optimal mix of investment assets based on estimates of their likely return, risk, and covariance (Markowitz 1952). However, the most commonly utilized measure of municipal revenue structures is the Hirschman-Herfindahl Index (HHI), which captures only the revenue portfolio’s diversity (or concentration). This means that HHI alone will likely be poorly suited to understanding revenue structure performance, as it provides no information derived from the essential characteristics of the revenue streams incorporated into the revenue structure—their growth, risk, and covariance— that, conceptually, underly the logic for diversification (Janson & Marlowe, 2023).
Scholars have used MPT to analyze government revenue portfolios (White 1979, 1980), including municipal portfolios (Berg et al. 2000, Harmon & Mallick 1994, White 1980). This paper applies MPT to the revenue structures of Minnesota’s municipal government using a panel of financial data from 2003 to 2022, identifying theoretically optimal portfolios with both mean-variance and mean semi-variance techniques. It will inform municipal revenue management in two ways: 1) assessing the importance of risk measurement in portfolio analysis, introducing risk asymmetry to distinguish between upside and downside deviations, and 2) providing information on the importance of service provision to revenue management by identifying how municipal service profiles might condition the specification of portfolio efficiency.

Improving Inference via Data-Based Identification of Unobserved Variables and Unusual Data Points (In Progress, with Randal J. Verbrugge)
Abstract: Omitted variable bias is well-known problem that, if the variable is not present in a data set, seems impossible to discover. But two other problems are equally damaging and underappreciated: most classical estimators are highly fragile (their asymptotic distributions diverge with modest contamination) and have low breakdown points (the estimate can be totally spoiled by a miniscule percentage of unusual data). None of these threats disappear asymptotically; none is easy to detect in large, multivariate data; all of them compromise inference. Herein we show how, in some cases, one may use the data at hand (only) to detect the presence of an omitted variable: by locating sets of points that appear to come from a different data-generating mechanism. Their detection can lead to deep insights into the data-generating mechanism. We provide some salient examples.