Nicolai Waldstrøm

Nicolai Waldstrøm

PhD Fellow

University of Copenhagen

I am a Ph.D student affiliated with the Department of Economics, at the University of Copenhagen. My research interests involve business cycle macroeconomics with a focus on the aggregate implications of micro level heterogeneity. My supervisors are Søren Hove Ravn and Jeppe Druedahl.

Research

The Transmission of Foreign Demand Shocks (2022)
with Jeppe Druedahl, Søren Hove Ravn, Laura Sunder-Plassmann and Jacob Marott Sundram. Working paper.

Abstract

Introducing heterogeneous households into a New Keynesian model of a small open economy enables the model to fit a set of stylized empirical facts about the transmission of foreign demand shocks. In the absence of a strong labor income effect on consumption, the model counterfactually implies that domestic consumption decreases as the central bank raises the interest rate to curb domestic inflation. With plausible marginal propensities to consume, the model instead produces the observed increase in domestic consumption of both tradeable and non-tradeable goods. This implies that foreign demand shocks are more important for international business-cycle comovement than predicted by existing models. Our findings also have implications for stabilization policies: While monetary policy is well-suited to counteract foreign demand shocks, tra- ditional fiscal policies are inadequate, as they do not provide sufficient stimulus to the tradeable sector. This poses a particular challenge for countries with a fixed exchange rate or in a monetary union.


From Micro to Macro: The Influence of Firm Heterogeneity on Foreign Shock Transmission (2024)
with Christian B. Kastrup. Work in progress.
Abstract

We investigate the role of firm heterogeneity and adjustment costs in the trans- mission of foreign supply shocks. Our starting point comes from a theoretical insight: If larger firms rely more on easily adjustable inputs, such as materials, then the aggregate output response to changes in the price of these inputs gets amplified relative to a representative firm economy. We next provide empirical ev- idence that larger firms are indeed more materials-intensive and more responsive to an exogenous foreign shock. We show that a New-Keynesian general equilib- rium model with multiple sectors and firm heterogeneity is consistent with these facts. We find that firm heterogeneity, in line with the data, amplifies the response of output and prices to a foreign supply shock, but dampens the labor and GDP responses.


Inflation, Real Income, and Aggregate Demand (2023)
Work in progress.
Abstract

What is the effect of inflation on aggregate demand? In the canonical New Keynesian model the entire transmission occurs through the monetary policy response. I show that a heterogeneous agent models featuring positive MPCs and sticky wages features an additional transmission channel whereby inflation suppress real wages and aggregate demand to the extent that the MPC out of labor income is greater than the MPC out of profits, hence highlighting the distributional role of inflation. Indexing nominal wage growth to inflation is an adept policy in terms of stabilizing aggregate demand in the face of inflationary shocks. The theory also predicts larger welfare losses from inflation than the representative agent counterpart, and help rationalize a strong monetary policy tightening in the face of large surges in inflation.


Education

Ph.D in Economics
M.Sc. in Economics
B.Sc. in Economics

Teaching

Guest lecturer in Advanced Macroeconomics: Heterogenous Agent Models

  • Graduate level course on macroeconomic dynamics with heterogenous agents.

Teaching assistent in Advanced Economics of the Environment and Climate Change 2021

  • Graduate level course on environmental-, natural ressource- and climate change economics

Teaching assistent in Principle of Economics B 2018

  • Macro 101

Supervisor for BA thesis

  • I have supervised multiple students in areas within business cycle macro