Grey Gordon

To quantify its magnitude, we build a dynamic general equilibrium model with incomplete markets where agents differ in their health, labor productivity, and wealth. The health channel captures the two-way feedback between pure health shocks — which raise the risk of downward health transitions — and other aggregate shocks, namely, demand and productivity. Our novel estimation strategy identifies the shock correlations, pinning down the health channel.

Economic Brief June 2026, No. 26-20 Key Takeaways I investigate how well a stock-flow measure of labor markets — months supply of effective searchers — forecasts wage growth. The performance is competitive or better than existing market tightness measures at a one-year horizon. Current wage growth is projected to be flat at around 3.5 percent. Labor market tightness is often summarized by the vacancy-unemployment ratio, the unemployment rate or the quits rate.

Working Papers October 2025, No. 25-09 Hard sovereign defaults—defaults with large haircuts—are associated with deeper recessions, longer durations, and, as we show, larger devaluations than soft defaults. We rationalize these regularities by developing a single-proposer noise bargaining game and embedding it in a two-sector sovereign default model. Creditors weigh the sovereign's haircut offers against likely future offers and idiosyncratic valuation shocks.