Questioning Assumptions
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Bibliographic details
- Authors: PETER J WALKER
- Published: December 1, 2022
Profile and background
- Subject: Emi Nakamura, professor of economics at the University of California, Berkeley.
- Personal background:
- Grew up in Alberta, Canada.
- One of her favorite movies as a child was the 1987 docudrama The Race for the Double Helix.
- Described as a 42-year-old in the profile.
- Married to Jón Steinsson, fellow Berkeley economics professor; they met as undergraduates at Princeton.
- Parents Alice and Masao Nakamura are economists at the University of Alberta and the University of British Columbia, respectively.
- Recognition:
- In 2018, The Economist listed her among the decade’s eight best young economists.
- “A year later she won the John Bates Clark Medal—awarded to the most influential American economist under the age of 40—for her research on fiscal stimulus and price stickiness.”
Research approach and methods
- Core methodology: using micro data (data on individual people, households, and businesses) to answer macroeconomic questions and improve causal identification.
- Rationale: “There often aren’t enough data points in the macro data to make convincing arguments about causality. Looking at micro data is a natural way to expand the data set.”
- Typical research traits:
- Painstaking attention to data and melding of theory with empirical methods.
- Distinguishing temporary phenomena (e.g., sales) from regular behavior in micro records.
- Willingness to undertake onerous data collection (e.g., custom microfilm conversion).
Price stickiness and inflation findings
- Key studies and findings:
- Bils and Klenow (2004) earlier finding: half of prices lasting less than 4.3 months; used an extract of Bureau of Labor Statistics (BLS) micro data for two years, 1995–97.
- Nakamura and Steinsson’s “Five Facts about Prices” (2008):
- Used actual BLS micro data expanded to cover 1988 to 2005.
- By separating temporary sales from regular pricing, they found regular prices were stickier than Bils and Klenow estimated.
- Observation: “Prices changed much more frequently in times of high inflation.”
- “The Elusive Costs of Inflation” (2018):
- Examined the higher-inflation period between 1977 and 1988.
- Confirmed that regular prices were adjusted more frequently in periods of higher inflation.
- “The Slope of the Phillips Curve” (2022):
- Originated from analysis by the Macro Policy Lab.
- Using data going back to 1978, the authors find that the slope of the Phillips curve is small—and has gotten only modestly smaller since the early 1980s.
- Implication: the early 1980s disinflation was less about higher unemployment and more about anchored inflation expectations under the new monetary regime instituted by Federal Reserve Chairman Paul Volcker.
- Policy-relevant implications:
- Accurate monitoring of economy-wide price changes requires distinguishing sales from regular price movements.
- Maintaining long-term inflation expectations and confidence in the monetary regime is “key” when central banks attempt to rein in inflation while growth dwindles.
Fiscal stimulus and other empirical contributions
- “Fiscal Stimulus in a Monetary Union” (2014):
- Focused on US military spending variation across regions to estimate fiscal multipliers within a common monetary and tax policy environment.
- Analyzed 40 years of military purchases (including repairs and purchases of new aircraft carriers).
- Found evidence that fiscal multipliers “could be large,” indicating fiscal stimulus can significantly boost growth.
- “The Gift of Moving” (2022):
- Natural experiment from Iceland’s Westman Islands volcanic eruption on January 23, 1973.
- Tracked parents and children over the subsequent 34 years using detailed Icelandic data on income, education, and genealogical linkages.
- Findings:
- Children who moved had higher levels of education and earnings than if they had stayed.
- Parents of movers earned slightly less, suggesting large parental costs that may discourage moves and act as barriers to social mobility.
- Noted that moves often involved relocating to lower-income areas, yet children’s life outcomes improved when skills matched local opportunities (e.g., fishing industry).
Collaboration, mentorship, and working style
- Partnership with Jón Steinsson:
- Complementary skills: Nakamura’s meticulousness and high standards for understanding; Steinsson’s idea generation and critical evaluation.
- Frequent coauthorship; the relationship strengthens research through rigorous critique.
- Family and cross-generational collaboration:
- Regular coauthorship and intellectual exchange with economist parents Alice and Masao Nakamura.
- Mentorship:
- Known for fostering constructive partnerships with PhD students; example: support for David Bruns-Smith when he switched from computer science to economics.
- Emphasis on substantive economic meaning over dogmatic attachment to formal frameworks.
Current and future work
- Ongoing projects include studies of:
- How exchange rate depreciations affect economic activity.
- The economic effects of unemployment insurance extensions.
- The impact of seasonal adjustment methods used for government statistics.
Peter J. Walker. F&D Magazine. December 2022.
Content in this bundle
- Questioning Assumptions: Emi Nakamura profile