Daniel Albuquerque

Entrepreneurship promotes wealth accumulation. However, Black households face significant barriers to entrepreneurship, operating fewer and smaller businesses. We formalize a general equilibrium model of entrepreneurship choice and wealth accumulation in which Black households experience adverse distortions as entrepreneurs and as workers. Disciplined by micro and macro data, our model matches the observed racial wealth gap well and captures the correlation between wealth and entrepreneurship. We find that distortions faced by Black entrepreneurs are the key factor for understanding the racial wealth gap across the wealth distribution. Our analysis also indicates that addressing racial disparities in the US can substantially increase output.

This paper develops a Heterogeneous Agent New Keynesian (HANK) model with housing and individual landlords to examine how monetary policy affects housing and rental markets. Using new UK evidence we document that contractionary monetary policy generates a large, hump-shaped, decline in house prices, while rental prices remain flat. We match the model to micro and macro data, showing that behavioural frictions combined with departures from a RANK framework are key for generating these price dynamics. The results reveal that landlords largely fail to pass through higher interest rates to rents. However, this incomplete pass-through reduces the output–inflation trade-off facing inflation-targeting central banks.

We develop a medium-scale Heterogeneous Agent New Keynesian (HANK) model tailored to the UK, featuring rich household heterogeneity alongside detailed housing, international, and fiscal blocks. The model generates realistic income and wealth distributions as well as marginal propensities to consume consistent with UK evidence. We use the model to decompose monetary transmission into its key transmission channels and assess their relative importance. We then demonstrate the model's versatility through several policy-relevant applications: across tenure groups, mortgagors' consumption is most sensitive to house price changes; a lower share of sterling invoicing in exports mildly weakens monetary transmission; balanced-budget fiscal reaction functions strengthen monetary transmission; and shifts in household balance sheets over the past two decades have dampened the transmission of interest rate changes to prices.

We describe a medium-scale, open-economy dynamic stochastic general equilibrium model of the UK economy, which has its foundations in ‘COMPASS’, the Bank of England's ‘Central Organising Model for Projection Analysis and Scenario Simulation’ described in Burgess et al (2013). The model we describe is augmented to include imported energy goods in production and consumption, time-varying trends, an expanded set of economic shocks and real adjustment costs. We parametrise the model via a mix of calibration and full-information Bayesian estimation. The model can match key moments in the UK data and aligns well with salient empirical impulse response functions. The model is part of a broader suite used to inform the monetary policy process at the Bank of England, and it can be used in a range of ways. In this paper, we explain how the model can be applied to produce structural decompositions, forecasts and counterfactual scenarios.

Rent prices rose by 9% on average in England after the Monetary Policy Committee began raising interest rates in December 2021, prompting concern that monetary policy is driving rents higher. We provide evidence that temporary increases in interest rates are ultimately associated with a decrease in rental prices, following an initial but relatively short-lived rise in rents and tenant demand — a pattern that holds across regions in England.