For a complete list of publications, please see my Curriculum Vitae.
Google Scholar: h=9 (All time)
Leverage and Rate of Return Heterogeneity among U.S. Households
-First version as job market paper, August 2018
-Third chapter of doctoral thesis, October 2019.
-Updated July 2021
This paper proposes panel-data for returns to U.S. households’ wealth and documents new facts on the heterogeneity in returns to wealth between households and over the wealth distribution. 1) Leverage exhibits permanent heterogeneity and explains the majority of permanent heterogeneity for the return to wealth. As such, permanent heterogeneity in returns to assets understates permanent heterogeneity in returns to wealth, with a standard deviation of 3.8 and 9.2 percentage points, respectively. 2) Returns to wealth decline as household’s become wealthier and exhibit declining returns to scale and specialization. 3) Household-specific returns to wealth and assets are correlated with the persistent component of labor earnings. 4) Housing and the regressivity of after-tax mortgage rates are critical to explain the permanent heterogeneity in returns. These findings are critical for the direction of scale dependence and degree of type dependence in return heterogeneity for the study of portfolio allocation, wealth inequality, social mobility, and corresponding policies.
Idiosyncratic Asset Return and Wage Risk of US Households
–Fourth chapter of doctoral thesis, October 2019.
–Last Updated May 2021 (new version with 2019 wave coming soon)
This paper documents the degree of idiosyncratic asset return risk, serial correlation, and correlation with wage risk for US households. Novel panel-data measures for returns on household assets are proposed. Sizeable idiosyncratic return risk is documented to exist concurrently with permanent heterogeneity in household-specific returns and exhibits negative serial correlation. On average, the idiosyncratic risk to wages and total asset returns are not correlated. However, this masks the correlated wage and return risk to private business assets and secondary housing assets and capital gains to primary housing. These estimates inform the covariance structure of idiosyncratic asset returns and wage risk.
Macroeconomic series are often aggregated from higher-frequency data. We show that this seemingly innocent feature has far-reaching consequences for the predictability of such series. First, the series are predictable by construction. Second, conventional tests of predictability are less informative about the data-generating process than frequently assumed. Third, a simple improvement to the conventional test leads to a sizeable correction, making it necessary to re-evaluate existing forecasting approaches. Fourth, forecasting models should be estimated with end-of-period observations even when the goal is to forecast the aggregated series. We highlight the relevance of these insights for forecasts of several macroeconomic variables.
Futures Prices are Useful Predictors of the Spot Price of Crude Oil (with R. Ellwanger)
– First version March 2021.
– LCERPA Working Paper No. 2021-4, May 2021.
– Updated September 2021, submitted
Contrary to the established view, futures prices significantly improve upon the accuracy of monthly no-change forecasts. This results from two innovations. First, we document that independent of the construction of futures-based forecasts, longer-horizon futures prices have become better predictors of crude oil spot prices since the mid-2000s. Second, we show that futures curves constructed using end-of-month prices instead of average prices have always been able to generate large accuracy-improvements for short-horizon forecasts of average prices. These findings are remarkably robust.
The New Benchmark for Forecasts of the Real Price of Crude Oil. (with A. Benmoussa and R. Ellwanger)
– First version February 2020.
– Bank of Canada, Sept. 2020, Staff Working Paper, 2020-39
– EEA presentation, August 2020
– New version coming soon, available by request
We reinvestigate the predictability of real crude oil prices when model-based real-time forecasts are compared against the optimal no-change benchmark, the end-of-period no-change. Despite unprecedented forecast improvements when models are estimated with end-of-period observations, following Ellwanger and Snudden (2021), a wide range of previously proposed model-based crude oil price forecasts cannot outperform the optimal benchmark at short horizons. Both the large forecast gains and the higher bar to claim forecastability necessitate a reconsideration of the short-term forecastability of crude oil prices.
Please note, the theoretical contributions from the BoC working paper have been generalized, expanded upon, and moved to the paper “Predictability of aggregated time series.” Similarly, the results pertaining to futures forecasts have been moved to “Futures Prices are Useful Predictors of the Spot Price of Crude Oil.”
Demand for Skilled International Migrants: Implications for Labor Market Outcomes and Remittances (with S. Alhadi)
-Updated March 2021, submitted
This paper documents several new facts, using structural and dynamic evidence, of the drivers and consequences of substitution in the demand for skilled versus unskilled international migrants. Key among these are that because substitutions are not reflected in aggregate employment outcomes, it is necessary to deconstruct migration by skill level to understand aggregate wages, participation rates and remittances. This evidence informs the economic theory of migration, policy, and the future path of migrant skill demand.
Snudden, S. (2019). Household Return Heterogeneity in the United States.
– Recipient of the 2019-2020 C.A. Curtis Prize in Economics for best PhD thesis.
This thesis provides empirical evidence on heterogeneity in returns on wealth among U.S. households.
Coletti, D., R. Lalonde, P. Masson, D. Muir and S. Snudden, 2021. “Commodities and Monetary Policy: Implications for Inflation and Price Level Targeting” Journal of Policy Modelling (Bank of Canada Working Paper, 2012-16)
This paper examines the relative merits of price level versus inflation targeting in response to international shocks to primary commodity markets. Persistent crude oil price movements result in significant deterioration of the inflation-output gap trade-off available to central banks. When such terms-of-trade shocks are prevalent, price level targeting is inferior to inflation targeting.
Snudden S., 2019. “Labor and Behavior Determinants of Remittances in Saudi Arabia.” Economic Notes, Special Issue: The Political Economy of Migrant Remittances, vol. 48(3): 1-16. (working paper)
This is the first study to structurally deconstruct remittance dynamics into the behavioral and labor market outcomes of migrants. For Saudi Arabia, the estimates suggest that migrant labor supply is highly elastic. The important determinates of remittance dynamics are the marginal propensity to remit, migrant wages, and the extensive margin of migrant labor supply. The marginal propensity to remit is found to respond counter‐cyclically to foreign gross domestic product.
Snudden S., 2018. “International Remittances, Migration, and Primary Commodities.” The World Economy, vol. 41(11): 2934–2953. (working paper, appendix)
This paper documents the global crude oil market as a driver of international migration and remittances. Large oil exporters who are labor importers transmit international financial and labor spillovers to oil-importing labor exporters. Despite large financial flows, the remittees’ economic conditions are dominated by the trade and crude oil channels.
Snudden S., 2018. “Targeted Growth Rates for Long-Horizon Crude Oil Price Forecasts.” International Journal of Forecasting, vol. 34: 1–16.
This paper uses insights from spectral analysis to develop a technique to improve medium- to long-horizon forecast accuracy. The technique is applied to forecast methods of the price of crude oil and found to be able to generate similar precision at 1-5 year horizons that had previously only been found at horizons of less than one year.
Snudden S., 2016. “Cyclical Fiscal Rules for Oil-Exporting Countries.” Economic Modelling, vol. 59: 473–483.
This paper examines optimal fiscal and monetary policy responses to temporary shocks to the international market for crude oil. Budget-balance tax-gap rules and inflation targeting are the preferred regimes in order to stabilize the macroeconomic volatility and welfare in oil-exporting countries. The output-inflation trade-off is of particular concern for oil exporters relative to non-oil commodity exporters due to the pass through of oil prices into headline inflation.
Andersen, D., B. Hunt, and S. Snudden. 2014. “Fiscal Consolidation in the Euro Area: How Much Pain can Structural Reforms Ease?” Journal of Policy Modeling, vol. 36(5): 785–799.
This paper examines the scope for structural reforms in the euro area to offset the negative effects of fiscal consolidation. The results suggest that structural reforms in core countries could be expected to offset the near-term negative impact on activity arising from the required fiscal consolidation. However, for the periphery, the results suggest that it would take several years before structural reforms could return the level of output back to its pre-consolidation path.
Beaton, K., R. Lalonde, and S. Snudden. 2014. “The Propagation of U.S. Shocks to Canada: Understanding the Role of Real-Financial Linkages.” Canadian Journal of Economics, vol. 47(2): 466-497.
This paper introduces a financial accelerator, inter-bank lending markets, and international bank lending into an international DSGE model. We find that the U.S. banking and interbank markets are an important source of variability. The presence of both the demand and the real supply sides of credit in the model help to capture the stylized facts of both domestic and international business cycles.
Coenen, G., C. de Resende, C. Erceg, C. Freedman, D. Furceri, J. in’t Veld, M. Kumhof, R. Lalonde, D. Laxton, J. Linde, A. Mourougane, D. Muir, S. Mursula, J. Roberts, W. Roeger, S. Snudden, and M. Trabant, 2012. “Effects of Fiscal Stimulus in Structural Models.” American Economic Journal: Macroeconomics, vol. 4(1): 22–68.
This paper compares discretionary fiscal stimulus using seven policy and two prominent academic DSGE models. Considerable agreement across models is found on both the absolute and relative sizes of different types of fiscal multipliers. Fiscal policy is most effective if it has moderate persistence and if monetary policy is accommodative. Permanently higher deficits imply significantly lower initial multipliers.
Klyuev, V. and S. Snudden, 2011. “Effects of Fiscal Consolidation in the Czech Republic.” The Czech Journal of Economics and Finance, vol. 61(4): 306-326.
This paper assesses dynamic fiscal multipliers for a variety of fiscal instruments, consolidation durations, assumptions about credibility, and monetary policy responses in the Czech Republic. The article evaluates proposed and alternative “growth-friendly” fiscal consolidations to achieve the government’s balanced budget target.
Duttagupta, R., J, Bluedorn, A. Pescatori, and S. Snudden . “Commodity Price Cycles and Commodity Exporters,” Chapter 4 in the World Economic Outlook, April 2012. International Monetary Fund: Washington D.C.
Anderson, D., M. Badia, E. Ruiz, S. Snudden and F. Vitek, 2015. “Fiscal Consolidation under the SGP: Some Illustrative Simulations,” Chapter 7 in Mechanics of a Strong Euro Area, by M. Pradhan, and P. K. Brooks (eds), International Monetary Fund: Washington D.C.
de Resende, C., R. Lalonde, and S. Snudden, “The Power of Many: Assessing the Economic Impact of the Global Fiscal Stimulus,” Bank of Canada Discussion Paper 2010-1.
de Resende, C., K. Beaton, R. Lalonde, and S. Snudden, 2010. “Prospects for Global Current Account Rebalancing,” Bank of Canada Discussion Paper 2010-4.
Andersen, D., B. Hunt, M. Kortelainen, M. Kumhof, D. Laxton, D. Muir, S. Mursula, and S. Snudden, 2013. “Getting to Know GIMF: The Simulation Properties of the Global Integrated Monetary and Fiscal Model,” IMF Working Paper No. 2013-55.
Andrle, M., P. Blagrave, P. Espaillat, K. Honjo, B. Hunt, M. Kortelainen, R. Lalonde, D. Laxton, E. Mavroeidi, D. Muir, S. Mursula, and S. Snudden, 2015. “The Flexible System of Global Models – FSGM,” IMF Working Paper No. 2015-64.
“A Better Way to Forecast Crude Oil Prices,” Economics and Policy Blog, The John Deutsch Institute for the Study of Economic Policy, Queen’s University, October 24, 2016.
“Oil Exporters Should NOT Price Level Target,” Economics and Policy Blog, The John Deutsch Institute for the Study of Economic Policy, Queen’s University, March 31, 2017.
“How we decided on 2% fiscal stimulus during the Great Recession,” Economics and Policy Blog, The John Deutsch Institute for the Study of Economic Policy, Queen’s University, June 21, 2017.
Interviews (Not Authored)
“Laurier economists on whether a recession is coming” Sept. 12, 2019, Wilfrid Laurier University.