Daniele Caratelli

I am a research economist at the U.S. Treasury Office of Financial Research. My research focuses on macroeconomics, specifically on monetary economics and labor macroeconomics.
Views expressed here are my own and do not necessarily reflect those of the U.S. Treasury or Office of Financial Research.

For more details here is my CV.


Working Papers:

Labor Market Recoveries Across the Wealth Distribution

This paper studies why, even after accounting for standard characteristics, low-wealth workers experience larger falls and slower recoveries in earnings than high-wealth workers do after the onset of recessions. I show that differences in job-switching and job-losing rates are important in explaining these dynamics. To do so, I build a quantitative search and matching model with incomplete markets, on-the-job search, and in which workers who switch jobs experience an increase in the risk of subsequent job-loss, a fact I document empirically. Wages are determined by a generalized alternating offer bargaining protocol that accommodates risk-aversion, wealth accumulation, and on-the-job search. Using this model, I conclude that cyclical differences in job-switching and job-losing by wealth, which the model can endogenously reproduce, explain 40 percent of the gap in the earnings recovery between low- and high-wealth workers following the Great Recession. I apply the model to study the post-Pandemic behavior of job-switching and show that fiscal stimulus alleviated its fall and sustained its recovery.
Winner of the 2022 Best Job Market Paper Award, EEA and UniCredit Foundation

Optimal Monetary Policy with Menu Costs (New version, Oct `23)
with Basil Halperin

We analytically characterize optimal monetary policy in a multisector economy with menu costs, and show that inflation and output should move inversely following sectoral shocks. That is, after negative shocks, inflation should be allowed to rise, and vice versa. In a baseline parameterization, optimal policy stabilizes nominal wages. This nominal wage targeting contrasts with inflation targeting, the optimal policy prescribed by the textbook New Keynesian model in which firms are permitted to adjust their prices only randomly and exogenously. The key intuition is that stabilizing inflation causes shocks to spill over across sectors, needlessly increasing the number of firms that must pay the fixed cost of price adjustment compared to optimal policy. Finally, we show in a quantitative model that, following a sectoral shock, nominal wage targeting reduces the welfare loss arising from menu costs by 81% compared to inflation targeting.
Supported by the Washington Center for Equitable Growth
Media: Marginal Revolution

The More You Learn, the Fewer Places You'll Go: The Rise in Education and the Decline in Worker Mobility (New, Oct `23)
with Aniket Baksy

Why has worker mobility in the United States declined so much over the past decades? While previous work attributes this decline to reduced labor market dynamism, this paper reveals that one third of this decline is due to increased educational attainment among workers. Higher education affects labor mobility in two ways. First, having a larger share of young workers in school rather than in the labor market precludes these very workers, who are typically the most mobile, from switching jobs and occupations. Second, education provides workers an alternative to learning about their ''type'' making educated workers less reliant on experimenting with new jobs.


Macroeconomic Nowcasting and Forecasting with Big Data
with Brandyn Bok, Domenico Giannone, Argia Sbordone, Andrea Tambalotti
(Annual Review of Economics, 2018)

Data, data, data… Economists know their importance well, especially when it comes to monitoring macroeconomic conditions - the basis for making informed economic and policy decisions. Handling large and complex data sets was a challenge that macroeconomists engaged in real-time analysis faced long before so-called big data became pervasive in other disciplines. We review how methods for tracking economic conditions using big data have evolved over time and explain how econometric techniques have advanced to mimic and automate best practices of forecasters on trading desks, at central banks, and in other market-monitoring roles. We present in detail the methodology underlying the New York Fed Staff Nowcast, which employs these innovative techniques to produce early estimates of GDP growth, synthesizing a wide range of macroeconomic data as they become available.

Blog posts:

Opening the Toolbox: The Nowcasting Code on GitHub
with Patrick Adams, Brandyn Bok, Domenico Giannone, Eric Qian, Argia Sbordone, Camilla Schneier, Andrea Tambalotti
(Liberty Street Economics, 2018)

Just Released: Introducing the New York Fed Staff Nowcast
with Grant Aarons, Matt Cocci, Domenico Giannone, Argia Sbordone, Andrea Tambalotti
(Liberty Street Economics, 2016)