Isaac Baley
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Research

Macro Fluctuations with Micro Frictions
Google Scholar

ERC Video Presentation

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Research Statement
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Book​

The Data Economy: Tools and Applications (w/ Laura Veldkamp) 
Princeton University Press, 2025
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​Refereed Publications
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(8) The Macroeconomics of Irreversibility 
(w/ Andrés Blanco)   
Review of Economic Studies (Forthcoming)
Paper       Appendix       CEPR
We investigate how irreversible investment, arising from a wedge between capital purchase and resale price, affects aggregate capital fluctuations. Irreversibility is crucial to match micro-level investment data and the persistence of business cycles.

(7) Returns to Labor Mobility 
(w/ Lars Ljungqvist & Thomas Sargent)   
The Economic Journal (June, 2024)
Paper        Appendix 
Reliance on firm size dynamics and shocks intermediated through neoclassical production functions yields large returns to labor mobility that are robust to parameter perturbations, while the reliance on labor economics statistics to calibrate per-worker productivity processes can give rise to fragilities.

(6) Cross-Phenomenon Restrictions: Unemployment Effects of Layoff Costs and Quit Turbulence
(w/ Lars Ljungqvist & Thomas Sargent)  
Review of Economic Dynamics (Vol. 50, October 2023) 
Paper      Appendix
Cross-phenomenon restrictions associated with returns to labor mobility inform calibrations of productivity processes in macro-labor models.  

(5) Bayesian Learning 
(w/ Laura Veldkamp) 
Handbook of Economic Expectations, Chapter 23 (November 2022) 
Working Paper       Science Direct

Learning is the process by which agents form beliefs. We survey the literature on Bayesian learning and consider the types of consequences these beliefs have on economic outcomes. 

(4)  Mismatch Cycles
(w/ Ana Figueiredo & Robert Ulbricht)    
Journal of Political Economy (Vol. 130, No. 11, November 2022)

Paper        Appendix      Blog
During recessions, highly mismatched jobs are destroyed but also created. An equilibrium model of the labor market with directed search, multidimensional sorting, learning about skills, and aggregate shocks accounts for the cyclical dynamics of skill mismatch and occupational switching in the US.

(3) Aggregate Dynamics in Lumpy Economies 
(w/ Andrés Blanco)
Econometrica (Vol. 89, No. 3, May 2021) 
Paper         Appendix        Online Appendix   
When agents make lumpy choices (investment, price-setting…), we show that two steady-state statistics, easily computed with microdata, predict how the economy responds to macro shocks and inform the size of adjustment frictions. 

(2) Can Global Uncertainty Promote International Trade? 
(w/ 
Laura Veldkamp & Michael Waugh)
Journal of International Economics (Vol. 126, Sep 2020)
Paper         Appendix​        Codes      Business Talk Interview
Terms of trade uncertainty can fuel more trade in a simple general equilibrium trade model with information frictions.

(1) Firm Uncertainty Cycles and the Propagation of Nominal Shocks
(w/ Andrés Blanco)
American Economic Journal: Macroeconomics (Vol. 11, No. 1, Jan 2019)
Paper        Appendix      
Firm idiosyncratic uncertainty is a key determinant of micro pricing behavior and aggregate price flexibility.
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Working Papers
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(9) Lumpy Forecasts 
(with Javier Turén)  
CEPR Working Paper       BSE       VoxEU   
We document that professional forecasters adjust their inflation forecast in a lumpy way—periods of inaction followed by large adjustments. Using a fixed-event forecasting framework, we assess the learning speed and the effect of the consensus forecast and individual beliefs on forecast revisions’ extensive and intensive margins of forecast revisions. 

​(10) Self-Insurance in Turbulent Labor Markets 
(with 
Ana Figueiredo, Cristiano Mantovani, and Alireza Sepahsalari)
Paper
We investigate the consequences of skill obsolescence on labor market outcomes when workers self-insure in the presence of imperfect financial markets and search frictions. 


Work in Progress

The Macroeconomics of Lumpy Forecasts 
(with Javier Turén)  
Higher inflation volatility increases the frequency and size of forecast revisions as well as forecast errors: forecasts are more flexible but less accurate. This amplifies inflation shock pass-through and challenging monetary policy.
Preliminary Draft 

​Corporate Taxes, Investment Frictions, and Macroeconomic Dynamics 
(w/ Andrés Blanco and Nicolás Oviedo)
We study how corporate taxation interacts with two investment frictions-fixed capital adjustment costs and irreversibility wedges-in determining the persistence of aggregate shocks.

Preliminary Draft 
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Monetary Policy and Corporate Tax Reforms 
(w/ Andrés Blanco, Erin Markiewitz, and Nicolás Oviedo)
Preliminary Draft 
Monetary policy rate increases following "long-run motivated" corporate income tax cuts. 

Sufficient Statistics for Investment Dynamics: An Empirical Investigation 
(w/ Andrés Blanco, Miguel Bandeira, Laura Castillo-Martínez, Madalena Gaspar and Nicolás Oviedo)
We test the sufficient statistics formula for aggregate investment dynamics derived from a lumpy adjustment model. Using state-space methods and Bayesian estimation applied to microdata in Chile and Colombia, we show that sufficient statistics successfully predict cumulative investment responses to aggregate productivity shocks.

​SS for SS: State-Space Methods for Lumpy Economies 
(w/ Miguel Bandeira and Laura Castillo-Martínez)
We introduces a general statistical framework to study aggregate shock propagation in a dynamic (S,s) economy, enablingresearchers to combine micro and macro data to estimate parameters, cross-sectional distributions of latent states over time, impulse responses to aggregate shocks, and forecast any function of the cross-sectional distribution of lumpy variables. 

Demand Uncertainty and Investment 
(w/Priit Jeenas and Manuel García-Santana)

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Notes

The Partial Data Barter Trades of the Digital Economy
Brooking Article

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Dormant projects
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Policy Uncertainty and Sovereign Bond Markets
(w/ Felix Matthys)
Government bond yields are affected differentially by global and country-specific policy uncertainty factors. ​

Price Duration and Passthrough
(w/ Federico Kochen and Daniel Sámano)
Exchange rate passthrough is larger for products with young (recently set) prices.
Preliminary Draft


Other Publications (In Spanish)

Baley (2022) La Heterogeneidad Empresarial y las Dinámicas Macroeconómicas, en Blog Nada es Gratis. 

Baley, De la Peza and Martínez (2009) La Importancia del Sistema de Pensiones en el Desarrollo de los Mercados Financieros en Proceso de Innovación Financiera en la Economía Global, Banco de México

Baley (2009) El Registro de Garantías Mobiliarias y su Impacto en el Mercado de Crédito Garantizado, Tesis de Licenciatura, Instituto Tecnológico Autónomo de México Texto Slides
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