In this doctoral dissertation, I broadly study the impact of information on economies from both a theoretical and an empirical perspective. Specifically, I study how strategic agents in a heterogeneous interacting network make decisions under incomplete information and how their actions are affected by the parameters that define the incompleteness of the information, with an emphasis on the social value of information. I then estimate the impact of information disclosure on the stock market by studying the specific example of the annual CCAR and DFAST bank stress tests conducted by the Federal Reserve. This dissertation consists of two chapters. In the first chapter, I study a game of heterogeneous strategic interactions under incomplete information. I characterize the equilibrium actions and compare them to the benchmark constrained-efficient allocation. I parameterize the available information in terms of pairwise information commonality and accuracy and study how changing the said commonality and accuracy affects the social welfare. I also study how the structure of interactions between players affects the social value of information. I find that the extent of the inefficiency of the economy dictates the social value of information. I provide a complete characterization of the comparative statics of the social welfare with respect to commonality and accuracy for completely efficient economies. I find that when interactions are heterogenous, it is possible for social welfare to be non-monotonic with respect to information commonality, a behavior unseen in economies with homogeneous interactions. For inefficient economies, I provide sufficient conditions under which the social welfare exhibits monotonic behavior. In the second chapter, I study the predictability of the results of the annual Comprehensive Capital Analysis and Review (CCAR) and Dodd-Frank Act Stress Test (DFAST) conducted by the Federal Reserve. I find that these results are highly predictable on year-to-year basis. I also find a high degree of predictability within the adverse scenario and the severely adverse scenario results within a given year. I find that that these predictable trends hold over time, from 2012 to 2020. I also try to ascertain the impact of the announcement of these results on the stock market and find no statistically significant effect. Lastly, I study the fixed effect impact of the disclosure events on the stock and options market. I find that while there are individual instances of significant impact, there is no significant impact across the years. I discuss potential implications of these patterns for the further development and application of stress testing.

The field of macroeconomics has increasingly turned its attention towards understanding the state dependent effects of macroeconomic policies, the idea being that different macroeconomic conditions—e.g., the state of the business cycle, or the distribution of income over the population—can cause a single economic policy shock to propagate differently through the economy. I turn this thinking around in this dissertation, and instead ask whether the policies that we study are, in practice, “single economic policy shocks” or are, instead, aggregates of multiple policies with different effects. In chapter 1, I decompose monetary policy into an interest rate component, and a component that captures macroeconomic information provision. In chapter 2, I discuss the consequences of tariff policy in light of the view that tariffs in the United States are extremely heterogeneous and, on average, regressive in nature. In chapter 3, I return to monetary policy, asking whether more-transparent communications from the Federal Reserve have allowed for a more effective transmission of monetary policy. To summarize my findings, in all cases I find that the economic consequences estimated using disaggregated policy measures differ substantially from the consequences estimated using aggregated measures.

My dissertation within monetary macroeconomics focuses on uncovering the impact of micro level heterogeneity in household wealth portfolios and firm size on aggregate macroeconomic variables. Using household- and firm-level datasets, I study these outcomes in the context of exploring the effects of monetary policy shocks. Most macroeconomic models use a representative agent framework to study the effects of monetary policy. In such models all consumers are assumed to be similar, therefore, it is only required to know the size of the monetary policy shock and its average impact to estimate the overall effect. But recent literature has emphasized the importance of agent heterogeneity for explaining observed aggregate dynamics and optimal policy design. Here, it matters which consumers get the extra income as people react differently to the shock. In a model with a realistically calibrated household balance sheet, monetary policy has redistribution effects because different agents have differential exposure to the interest rate and inflation risk born in their portfolios. For example, short-term or nominal borrowers will win from a sudden decrease in the interest rate and a sudden increase in inflation, while short-term lenders or nominal lenders will lose. In the first chapter of the dissertation, co authored with Anastasia Burya, we study the effect of heterogeneity in consumers' portfolios on the unemployment response to monetary policy. We develop a search efforts model with heterogeneous agents and then decompose the effect of the monetary policy shock on aggregate unemployment. The direction and the magnitude of the wealth effect will determine whether people search for jobs more actively after a monetary contraction. For example, if unemployed consumers are indebted, they experience a negative wealth effect after a contraction, search for jobs more actively and increase their probability of finding a job, therefore, reducing unemployment. In this framework, the sign of the overall effect of monetary policy on unemployment will depend on whether unemployed consumers are indebted and the magnitude of their debt. We test the prediction of the model in both micro and aggregate data. To test the prediction of the model in the micro data using the PSID panel dataset, we estimate the coefficient of the interaction term between various mortgage measures and Romer \& Romer monetary policy shocks while looking at five main transition probabilities that indicate a higher increase in search efforts for indebted people after a monetary contraction: dynamic transition probability of moving from non employment to employment, moving from non participation in the labor force to employment, remaining a non participant in the labor force, remaining unemployed and taking up an extra job. In the aggregate data, we use a similar estimation approach with debt to income ratio. We also subject this to a variety of checks using age and Saiz instruments for increased robustness. In the second chapter of the dissertation, co-authored with Anastasia Burya and Martsella Davitaya, we show that inflation expectations are anchored. If inflation expectations are anchored, then their sensitivity to monetary policy should be smaller than if they are de-anchored. When the Fed pursues inflation targeting, the market expectations of Fed's reaction should affect the response to current monetary policy shocks. We use daily bond yield data to show that the sensitivity of inflation expectations to monetary policy is lower if the Fed is more responsive to inflation during the previous CPI release. Intuitively, the Fed announcement leading to a rate change that is higher than expected from the CPI release indicates that the markets expect the Fed to react more aggressively in the future. Therefore, markets do not adjust inflation expectations as much (leading to anchored inflation expectations). The empirical strategy consists of two steps. First, we measure market expectations about the Fed's reaction to inflation by regressing the changes of different interest rates around the CPI release dates on the surprise change in CPI. Second, we estimate the sensitivity of inflation expectations' response to monetary policy based on the expectations about the Fed's reaction to inflation. Product markets are characterized by the significant heterogeneity of demand elasticity between large and small firms. In many cases, the ability of larger firms to dictate prices is such that they are able to charge higher markups. In the third chapter, co-authored with Anastasia Burya, we develop a simple model of firms with heterogeneous market power. We connect the recent trend of increasing market power to the flattening of the Phillips Curve through the decreasing aggregate pass-through. We explore the sufficient statistic arising from this model and then proceed to estimate it in the data. Here, we consider heterogeneity in demand elasticity and superelasticity. In the recent literature as well, papers such as Baqaee, Farhi and Sangani (2021) and Wang and Werning (2020) have brought to attention that certain parameters of demand are important for various macroeconomic dynamics such as the flattening of the Phillips Curve. It was also shown that the degree of these effects depends on the demand parameters, such as elasticity and superelasticity. We estimate these parameters in a novel format using an empirical procedure called Granular IV, which was first described in Gabaix and Koijen (2020) and makes use of the fact that in reality, unlike baseline macroeconomic models, some firms are big enough to impact the aggregates. For this estimation, we use firm-level price data from ACNielsen Retail Scanner database. Employing the novel empirical approach we estimate these relevant demand parameters. We estimate a demand elasticity of 3.23, in line with the literature. Our estimate for super elasticity is 3.74 which is in line with Marshall's second law of demand and for constant superelasticity parametrisation would signify the curvature of the demand curve between that of CES and linear demand.

My dissertation combines structural macroeconomic models with analyses of macro and micro data and broadly contributes to two research agendas. The first relates to the channels through which monetary policy impacts the economy. The second aims to understand how heterogeneity observed at the micro level affects the economy. The first two chapters, "Monetary Policy and Heterogeneous Mortgage Refinancing" and "A Model of Heterogeneous Mortgage Refinancing," focus on the refinancing channel of monetary policy. Since fixed-rate mortgages are the most significant source of household debt in the U.S., monetary policy can stimulate household consumption and wealth by lowering mortgage costs through refinancing. The potency of this channel will depend on households’ outstanding mortgage rates, as well as their willingness and ability to refinance. I combine empirical patterns from monthly loan-level data (from joint work with A.Burya) and a heterogeneous agent model of mortgage refinancing to show that credit score heterogeneity dampens the aggregate consumption response to monetary policy by 11%. The third and fourth chapters, "Anchoring of Inflation Expectations: An Empirical Test" and "Anchoring of Inflation Expectations: Role of Risk Premia," study the effectiveness of monetary policy in the U.S. by exploring the degree to which inflation expectations are anchored. If inflation expectations are well-anchored, then the Fed has a higher capacity to support aggregate employment when necessary, without destabilizing inflation. In joint work with A. Burya and S. Mishra, I construct a proxy of the change in the Fed's aggressiveness to inflation and develop an empirical test for inflation expectations anchoring. The proxy of the changes in the Fed's aggressiveness is equal to changes in expectations of future policy rates that are unexplained by the information contained in the inflation news release. The empirical test involves examining the sensitivity of inflation expectations to monetary policy shocks conditional on that proxy. I then use a measure of inflation expectations adjusted for inflation and liquidity risk premia to demonstrate that bond yield data in the U.S. is consistent with the anchoring of the long-term inflation expectations.

This dissertation studies topics in the areas of international finance. In the first chapter, the Unintended Consequences of Financial Sanctions, I study the economic impact of the U.S. financial sanctions against Russian companies in the aftermath of Russia's annexation of Crimea in 2014. I show that this sanctions program, which primarily cut off access to international financial markets for sanctioned firms, produced an unintended consequence of strengthening the sanctions targets relative to their unsanctioned peers. Specifically, while the policy successfully halted new international borrowings by sanctioned companies, the spillover impact of the policy resulted in these targets shrinking in size by less than unsanctioned Russian firms. To explain these results, I argue that sanctions led to a reallocation of domestic resources in favor of sanctioned firms. In particular, sanctions precipitated capital crowding out and credit rationing, causing unsanctioned domestic borrowers to suffer more from the policy. The research highlights the limitation of "targeted sanctions" and also sheds light more broadly on the impact of international financial integration and capital flows on firm size dynamics. In the second chapter, Quantitative Analysis of Sanctions Policy, I theoretically and quantitatively analyze the impact of financial sanctions on the target firms and the target economy. I introduce a heterogeneous firm model with segmented capital markets and financial frictions in which sanctions against international borrowers led to capital crowding out and credit rationing among domestic borrowers. I calibrate the model to the 2014 U.S. financial sanctions episode and use the model to estimate the impact of sanctions on firm sizes and macroeconomic variables. I also evaluate policy alternatives and identify factors for policymakers to consider in calibrating future sanctions programs. I conclude by discussing the 2022 sanctions program and inferring broader policy implications. In the third chapter, the Impact of Monetary Policy on the Specialness of U.S. Treasuries, I estimate the causal effect of monetary policy on the specialness of U.S. Treasuries. Quantifying this specialness by the U.S. Treasury Premium, which is the difference in the convenience yield of U.S. Treasuries and that of government bonds of other developed countries measured as the deviation from covered interest parity between government bond yields, I find that monetary tightening by the Federal Reserve increases the specialness of U.S. Treasuries primarily by increasing the convenience yield of U.S. Treasuries. I also find that the magnitude of the impact varies across the term structure and across countries, especially after the Global Financial Crisis, and U.S. and foreign monetary policy shocks have asymmetric impacts on the specialness of U.S. Treasuries. These results provide evidence for the unique ability of the Federal Reserve to affect the specialness of U.S. Treasuries by altering the supply of dollar safe assets.

Economic sociologists have long produced rich accounts of the economy’s embeddedness in social relations and the hybridity of contemporary governance architectures. However, all too often, they contented themselves with merely disenchanting a liberal ontology that divides the social world into neatly differentiated spheres, such as the state and the economy or the public and the private. In this dissertation, I argue that this is not enough. If we want to understand actually existing economic government, we also need to attend to the consequences of its persistent violation of the precepts of liberal order. This dissertation does so by accounting for the simultaneity of the Federal Reserve’s rise to the commanding heights of the US economy and the repeated, multi-pronged controversies over it. I contend that together, the Fed’s ascendance and the controversies surrounding it are symptomatic of the contradictions inherent to a liberal mode of governing ‘the economy’ which, on the one hand, professes its investment in a clear boundary between the state and the economy but which, on the other hand, operationally rests on their entanglement. Its embeddedness in financial markets exposes the Fed to attacks that it is either colluding with finance or that it unduly smuggles in political considerations into an otherwise apolitical economy. In response, to secure its legitimacy as a neutral arbiter of market struggles, the Fed needs to invest in autonomization strategies to demonstrate that it is acting neither in the interests of capital nor on behalf of partisan politicians but in the public interest. Its autonomization strategies in turn feed back onto the modes of embeddedness and governing techniques the Fed deploys, often resulting in new controversies. Combining insights from economic sociology and the sociology of expertise, the perspective developed in this dissertation thus foregrounds the persistent tension between embeddedness and autonomy and the sequences of reiterated problem-solving it gives rise to.Based on extensive archival research and interviews with actors, I reconstruct three such sequences in the Fed’s more-than-a-century long quest for embedded autonomy in three independent but related empirical essays. The first focuses on the decade immediately following the Federal Reserve System’s founding in 1913. It traces how the confluence of democratic turmoil in the wake of World War I, its hybrid organizational structure, and an alliance with institutionalist economists led Fed policymakers to repurpose open market operations from a banking technique into a policy tool that reconciled different interests. This made it possible to take on a task no other central bank had attempted before: mitigating depressions. This major innovation briefly turned the Fed into “the chief stabilizer” before it failed to fulfill this role during the Great Depression. The essay thus adds a critical, oft-forgotten episode to the genealogy of the Fed’s ascendancy and the rise of central banks to the foremost macroeconomic managers of our time. The second essay most explicitly develops the theoretical argument underlying this dissertation and applies it to a practice that has been all but ignored in the scholarship on central banking and financial government: bank supervision. Emphasizing its distinctiveness from regulation, I reconstruct how the Fed folded supervision into its project of governing finance as a vital, yet vulnerable system over the course of the second half of the 20th century and into the 21st. I especially focus on the Fed’s autonomization strategies in the wake of the 2008 Great Financial Crisis and its internal struggles which resulted in a more standardized, quantitative, and transparent supervisory process centered around the technique of stress testing. However, the Fed’s efforts to reassert its autonomy and authority have in the meantime become attacked themselves. The essay traces these controversies, and subsequent reforms, to the present day, further demonstrating the recursive dynamic of the Fed’s quest for embedded autonomy. The third essay finally zooms in on a single event during the Great Financial Crisis: the first major public stress test run by the Fed and the Treasury between February and May 2009. By reconstructing its socio-technical assembling in detail and comparing it to the failures of stress tests run by European agencies between 2009 and 2011, I show that the stress test’s success rested on a reconfiguration of the state’s embeddedness in financial circuits, allowing the Treasury’s material and symbolic capital to back the exercise and the Fed to function as a conduit that iteratively gauged and shaped its audiences’ expectations as to what a credible test would look like. This made it possible to successfully frame the test as an autonomous exercise based on expertise. Probing the structural, socio-technical, and performative conditions of the Fed’s claims to legitimacy, the essay thus resolves the ‘mystery’ (Paul Krugman) how a simulation technique could become a watershed event in the greatest financial crisis in a lifetime.

This dissertation examines the political, social, and economic responses to the end of the Bretton Woods system from 1971-1988 in the United States. It offers a “pre-history” of globalization which focuses on a period when international economic entanglement became a question of serious political debate within the U.S., but before “globalization” became common parlance. Contemporaries referred to the world after Bretton Woods as newly characterized by “interdependence,” a concept which highlighted vulnerability to external economic forces and declining national autonomy. This dissertation argues that far from enthusiastically embracing market globalization in this period, U.S. policymakers worked to supervise and manage global integration, and insulate workers, consumers, businesses, and themselves from the full force of the world economy. Restoring domestic social conflict to the center of our understanding of international economic policy, it investigates how labor unions and federations like the UAW and the AFL-CIO, business lobbying organizations like the National Association of Manufacturers and the Chamber of Commerce, and officials in the Treasury, Congress, and the Federal Reserve conflicted over their response to growing economic entanglement deep into the 1980s. It excavates a history of protectionism, planning, subsidies, industrial policy, currency politics, and other forms of state intervention—often driven by elites in the industrial Midwest and Northeast. The result of these collisions was an ambivalent and fragmented national approach to global integration which persisted until more recently than typically assumed. Rather than being driven by a coherent ideological vision for American power, or a clear-cut embrace of neoliberal theory, foreign economic policy was propelled forward by a much more contingent, ad-hoc, and conflictual process across this period. When globalization took on truly historical force in the 1990s, it was not because social conflicts over interdependence had been resolved, but because a more reluctant and resistant approach to global integration had lost its political and institutional foothold.