Stock Market Accounting (JMP) [Paper]
Abstract: Why have stock market valuations risen so dramatically since 1955? I build a model of the U.S. macroeconomy featuring pure rents, intangible capital, variation in discount rates, and a rich system of distortionary taxes. I use the model to decompose the origins of the approximately two-fold increase in the observed market capitalization to GDP (MCAP/GDP) and price dividend (PD) ratios, that occurred for the U.S. corporate sector between 1955 and 2022. I find that changes in tax policy alone account for approximately half of the increase in these valuation ratios. Increases in corporate sector markups, generating rent-based cash flows, generate, approximately, the remaining half of the increase in MCAP/GDP. Changes in productivity and discounting play minimal roles in the evolution of MCAP/GDP, but produce some relevant variation in the price-dividend ratio.
Computing Equilibria in Markov Jumping Economies [Draft in Progress]
Abstract: Tax rates often exhibit dramatic changes over short periods of time as a result of policy reforms. These economies can be modeled as experiencing changes in regime - states of the world in which deep parameters differ. As the set of feasible regimes grows, so does the associated computational burden, as decision rules must be computed for each regime. This amplifies the curse of dimensionality in economies with many states and many regimes. I describe linear-quadratic methods for computing equilibria in this class of tax-distorted economies, which provide significant computational gains.
Intangible Capital, Markups, and Global Stock Market Valuations after 2000
Globalization and Stock Market Valuations
The Intergenerational Transmission of Entrepreneurial Capital