About

Patrick Kehoe is a Professor of Economics at Stanford University and a member of the Academic Council Faculty. His research primarily focuses on international macroeconomics, with recent work developing business cycle models that quantitatively account for the Great Recession and exploring optimal bailout policies during economic downturns. He has also worked on categorizing patterns of business cycles across countries and over time, creating new models of financial frictions, and analyzing optimal monetary and fiscal policy, including time inconsistency issues in policies. Prior to his recent focus, Kehoe's work has encompassed a broad range of topics within macroeconomics and financial economics, contributing to the understanding of international finance, economic history, and the development of economic models. His research aims to push forward the frontier of knowledge in economics, combining both basic and applied research efforts.

Research topics

• Business

Selected publications

• A Neoclassical Model of the World Financial Cycle

  2025-03-21 · 2 citations

  preprintOpen access
  PublisherDOI

• A Neoclassical Model of the World Financial Cycle

  Working paper · 2025-02-24

  reportOpen access

  Emerging markets face large and persistent fluctuations in sovereign spreads. To what extent are these fluctuations driven by local shocks versus financial conditions in advanced economies? To answer this question, we develop a neoclassical business cycle model of a world economy with an advanced country, the North, and many emerging market economies, the South. Northern households invest in domestic stocks, domestic defaultable bonds, and international sovereign debt. Over the 2008-2016 period, the global cycle phase, the North accounts for 68% of Southern spreads' fluctuations. Over the whole 1994-2024 period, however, Northern shocks account for less than 20% of these fluctuations.

  PublisherOA PDFDOI

• The Macroeconomic Dynamics of Labor Market Policies

  2025-03-28

  preprintOpen access

  We develop a dynamic macroeconomic framework with worker heterogeneity, putty-clay adjustment frictions, and firm monopsony power to study the distributional impact of labor market policies over time. Our framework reconciles the well-known tension between low short-run and high long-run elasticities of substitution across inputs of production, especially among workers with different skills within a same education group. We use this framework to evaluate the effects of redistributive policies such as the minimum wage and the Earned Income Tax Credit. We argue that since these policies generate slow transition dynamics that can differ greatly in the short and long run, a serious assessment of their overall impact must take account of the entire time path of the responses they induce.

  PublisherDOI

• The Macroeconomic Dynamics of Labor Market Policies

  SSRN Electronic Journal · 2025-01-01

  articleOpen access
  PublisherDOI

• The Macroeconomic Dynamics of Labor Market Policies

  National Bureau of Economic Research · 2025-03-01

  reportOpen access

  We develop a dynamic macroeconomic framework with worker heterogeneity, putty-clay adjustment frictions, and firm monopsony power to study the distributional impact of labor market policies over time.Our framework reconciles the well-known tension between low short-run and high long-run elasticities of substitution across inputs of production, especially among workers with different skills within a same education group.We use this framework to evaluate the effects of redistributive policies such as the minimum wage and the Earned Income Tax Credit.We argue that since these policies generate slow transition dynamics that can differ greatly in the short and long run, a serious assessment of their overall impact must take account of the entire time path of the responses they induce.

  PublisherDOI

• Experimental Testing for the Validation of a Multi-body Dynamics Model for a Novel Electric Bus

  Lecture notes in mechanical engineering · 2024-01-01

  book-chapter1st authorCorresponding
  PublisherDOI

• Is a fiscal union optimal for a monetary union?

  Journal of Monetary Economics · 2023-11-10 · 5 citations

  articleOpen accessCorresponding
  PublisherOA PDFDOI

• Fiscal Federalism and Monetary Unions

  SSRN Electronic Journal · 2023-01-01

  articleOpen access
  PublisherDOI

• Fiscal Federalism and Monetary Unions

  National Bureau of Economic Research · 2023-12-01 · 3 citations

  reportOpen access

  We apply ideas from fiscal federalism to reassess how fiscal authority should be delegated within a monetary union.In a real-economy model with no fiscal externalities, in which local fiscal authorities have an informational advantage about the preferences of their citizens for public spending relative to a fiscal union, a natural generalization of the classic decentralization result by Oates (1972) applies.Namely, a decentralized fiscal regime dominates a fiscal union, and the degree of dominance increases as the information of the fiscal union worsens in quality.In the presence of direct fiscal externalities across countries, however, a decentralized regime is optimal for small federations of countries, whereas a centralized regime is optimal for large ones.We then consider a monetary-economy model, in which governments finance their expenditures with nominal debt and inflation has a negative impact on aggregate productivity.If the monetary authority can commit to an inflation policy, then a version of Oates (1972)'s decentralization result holds.By contrast, when the monetary authority lacks commitment power, the resulting time-inconsistency problem generates an indirect endogenous fiscal externality.In this case, when a country-level fiscal authority chooses a higher level of nominal debt, it induces the monetary authority to inflate more to reduce the level of distortionary taxes needed to finance the higher debt.Because country-level fiscal authorities do not take into account the costs to other countries of the inflation that their fiscal policies induce, a negative fiscal externality arises.This externality naturally becomes more severe as the number of countries in the monetary union increases.Hence, as in the real-economy model, a decentralized fiscal regime is optimal for small monetary unions, whereas a fiscal union is optimal for sufficiently large ones.Our key result is that as the size of a monetary union increases, it becomes relatively more desirable to centralize fiscal authority.We conclude by discussing the implications of our results for the debate on the integration of fiscal policy within the EU and its enlargement.

  PublisherDOI

• Asset Prices and Unemployment Fluctuations: A Resolution of the Unemployment Volatility Puzzle

  National Bureau of Economic Research · 2022-02-01 · 1 citations

  reportOpen access1st authorCorresponding
  PublisherOA PDFDOI

Recent grants

• Asset Market Frictions in Quantitative International Business Cycle Models

  NSF · $388k · 2002–2010

• Financial Frictions in Quantitative International Business Cycle Models

  NSF · $221k · 2004–2012

Frequent coauthors

• V. V. Chari

  493 shared

• Andrew Atkeson

  University of California, Los Angeles

  432 shared

• Ellen R. McGrattan

  222 shared

• Elena Pastorino

  Stanford University

  179 shared

• Virgiliu Midrigan

  New York University

  126 shared

• João Ayres

  Inter-American Development Bank

  97 shared

• Fernando Álvarez

  University of Chicago

  90 shared

• Susan Athey

  81 shared

Education

• Phd, Economics

  Harvard University

  1986