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Brookings Papers Pape on ECONOMIC ACTIVITY Janice Eberly and James H. Stock, Editors Br ooki ng s Brookings Papers Pape ON ECONOMIC ACTIVITY rs F ALL 2019 ON ECONOMI C AC GARTHWAITE, GRAVES, GROSS, KARACA, MARONE, and NOTOWIDIGDO TI on All Medicaid Expansions Are Not Created Equal: VI The Geography and Targeting of the Affordable Care Act TY AVERY, HOWELL, PENDER, and SACERDOTE on Policies and Payoffs to Addressing America’s College Graduation Deficit BPEA ANDRADE, GALÍ, LE BIHAN, and MATHERON F ALL on the Optimal Inflation Target and the Natural Rate 2 019 of Interest FORBES on Inflation Dynamics: Dead, Dormant, or Determined Abroad? STURZENEGGER on Macri’s Macro: The Elusive Road to Stability and Growth SAEZ and ZUCMAN www.brookings.edu on Progressive Wealth Taxation Brookings Papers ON ECONOMIC ACTIVITY FALL 2019 JANICE EBERLY JAMES H. STOCK Editors BROOKINGS INSTITUTION PRESS Washington, D.C. Copyright © 2020 by THE BROOKINGS INSTITUTION 1775 Massachusetts Avenue, N.W., Washington, D.C. 20036 ISSN 0007-2303 ISBN Print 978-0-8157-3825-1; ebook 978-0-8157-3829-9 Authorization to photocopy items for internal or personal use or the internal or personal use of specifc clients is granted by the Brookings Institution for libraries and other users registered with the Copyright Clearance Center Transactional Reporting Service, provided that the basic fee is paid to the Copyright Clearance Center, 222 Rosewood Drive, Danvers, MA 01923. For more information, please contact CCC at (508) 750-8400 or visit www.copyright.com. This authorization does not extend to other kinds of copying, such as copying for general distribution, for creating new collective works, or for sale. Specifc written permission for such copying must be obtained from the Permissions Department, Brookings Institution Press, 1775 Massachusetts Avenue, N.W., Washington, D.C. 20036; e-mail [email protected]. Brookings Papers ON ECONOMIC ACTIVITY FALL 2019 CRAIG GARTHWAITE, JOHN GRAVES, TAL GROSS, ZEYNAL KARACA, VICTORIA MARONE, and MATTHEW J. NOTOWIDIGDO All Medicaid Expansions Are Not Created Equal: The Geography and Targeting of the Affordable Care Act 1 Comments by Amy Finkelstein and Jonathan Skinner 71 General Discussion 88 CHRISTOPHER AVERY, JESSICA HOWELL, MATEA PENDER, and BRUCE SACERDOTE Policies and Payoffs to Addressing America’s College Graduation Defcit 93 Comments by Susan M. Dynarski and Caroline Hoxby 150 General Discussion 167 PHILIPPE ANDRADE, JORDI GALÍ, HERVÉ LE BIHAN, and JULIEN MATHERON The Optimal Infation Target and the Natural Rate of Interest 173 Comments by Michael T. Kiley and Luminita Stevens 231 General Discussion 249 KRISTIN J. FORBES Infation Dynamics: Dead, Dormant, or Determined Abroad? 257 Comments by Javier Cravino and M. Ayhan Kose 320 General Discussion 334 FEDERICO STURZENEGGER Macri’s Macro: The Elusive Road to Stability and Growth 339 Comments by Rafael Di Tella and Andrés Velasco 412 General Discussion 432 EMMANUEL SAEZ and GABRIEL ZUCMAN Progressive Wealth Taxation 437 Comments by Wojciech Kopczuk and N. Gregory Mankiw 512 General Discussion 529 This journal is printed in black and white but is available online in color. The numbered graphical fgures in a paper may contain colored elements (lines, dots, bars, and areas) to which the paper’s text refers. To see these colored elements, please consult the online versions of the papers at https://www.brookings.edu/project/brookings-papers-on-economic-activity/. PURPOSE The Brookings Papers on Economic Activity publishes research on current issues in macroeconomics, broadly defned. The journal emphasizes rigorous analysis that has an empirical orientation, takes real-world institutions seriously, and is relevant to economic policy. Papers are presented and discussed at conferences held twice each year, and the papers and discussant remarks from each conference are published in the journal several months later. Research fndings are described in a clear and accessible style to maximize their impact on economic understanding and economic policymaking; the intended audience includes analysts from universities, governments, and businesses. Topics covered by the journal include fscal and monetary policy, consumption and saving behavior, business investment, housing, asset pricing, labor markets, wage and price setting, business cycles, long-run economic growth, the distribution of income and wealth, international capital fows and exchange rates, international trade and development, and the macroeconomic implications of health costs, energy supply and demand, environmental issues, and the education system. We would like to thank the supporters of the Brookings Papers on Economic Activity conference and journal, including the Alfred P. Sloan Foundation; BlackRock Financial Management, Inc.; the National Science Foundation, under Grant No. 1756544; and State Farm Mutual Automobile Insurance Company. The papers and discussant remarks refect the views of the authors and not necessarily the views of the funding organizations or the staff members, offcers, or trustees of the Brookings Institution. CALL FOR Most papers that appear in the Brookings Papers on Economic PAPERS Activity are solicited by the editors, but the editors also consider submitted proposals. Editorial decisions are generally made about a year in advance of each conference. Therefore, proposals should be received by December 1 for the following fall conference and by June 1 for the following spring conference. Proposals can be submitted at http://connect.brookings.edu/ submit-your-paper-to-bpea. ACCESSING All past editions of the Brookings Papers on Economic THE JOURNAL Activity—along with appendix materials, data, and programs used to generate results—are made freely available for download at www. brookings.edu/past-bpea-editions. To purchase subscriptions or single copies, visit www.brookings.edu/press, or contact the Brookings Institution Press at (866) 698-0010 or P.O. Box 465, Hanover, PA 17331-0465. Brookings periodicals are available online through both the Online Computer Library Center (contact the OCLC subscription department at (800) 848-5878) and Project Muse (http://muse.jhu.edu). Archived issues of the Brookings Papers on Economic Activity are also available through JSTOR (www.jstor.org). EDITORS, Henry Aaron Brookings Institution Stephanie R. Aaronson Brookings Institution AUTHORS, George Akerlof Georgetown University DISCUSSANTS, Philippe Andrade Federal Reserve Bank of Boston ADVISERS, Christopher Avery Harvard Kennedy School PARTICIPANTS, Martin Neil Baily Brookings Institution AND STAFF Joe Beaulieu Brevan Howard Ben S. Bernanke Brookings Institution FOR THE Olivier Blanchard Peterson Institute for International Economics ONE HUNDRED William Brainard Yale University AND EIGHTH Steven Braun Council of Economic Advisers CONFERENCE Jesse Bricker Federal Reserve Board of Governors Marcus Casey Brookings Institution Gerald Cohen Haver Analytics Richard Cooper Harvard University Javier Cravino University of Michigan Gabriel Di Bella International Monetary Fund Rafael Di Tella Harvard Business School David Dollar Brookings Institution John Driscoll Federal Reserve Board Susan M. Dynarski University of Michigan Janice Eberly Northwestern University Wendy Edelberg Congressional Budget Offce Adam Falk Alfred P. Sloan Foundation Michael Faulkender U.S. Department of the Treasury Amy Finkelstein Massachusetts Institute of Technology Martin Fleming IBM Kristin J. Forbes Sloan School of Management, Massachusetts Institute of Technology Benjamin Friedman Harvard University Renée Fry-McKibbin Australian National University Jason Furman Harvard Kennedy School Joseph Gagnon Peterson Institute for International Economics William Gale Brookings Institution Jordi Galí Centre de Recerca en Economia Internacional Craig Garthwaite Kellogg School of Management, Northwestern University Ted Gayer Brookings Institution Karen Glenn Social Security Administration Tracy Gordon Urban Institute Robert J. Gordon Northwestern University Egor Gornostay Peterson Institute for International Economics Stephen Goss Social Security Administration Joshua Gotbaum Brookings Institution John Graves Vanderbilt University Tal Gross Boston University Robert E. Hall Stanford University John Haltiwanger University of Maryland Peter Henry NYU Stern School of Business Harry Holzer Georgetown University Jessica Howell The College Board Caroline Hoxby Stanford University Zeynal Karaca Agency for Healthcare Research and Quality, U.S. Department of Health and Human Services Michael T. Kiley Federal Reserve Board of Governors Aaron Klein Brookings Institution Jeffrey Kling Congressional Budget Offce Narayana Kocherlakota University of Rochester Wojciech Kopczuk Columbia University M. Ayhan Kose The World Bank Ed Lazear Stanford University Hervé Le Bihan Banque de France Nellie Liang Brookings Institution John Lipsky Johns Hopkins University (SAIS) Christos Makridis Sloan School of Management, Massachusetts Institute of Technology N. Gregory Mankiw Harvard University Victoria Marone Northwestern University Julien Matheron Banque de France Mark Mazur Urban-Brookings Tax Policy Center Warwick McKibbin Australian National University Karel Mertens Federal Reserve Bank of Dallas Frederic Mishkin Columbia University Adele C. Morris Brookings Institution Matthew J. Notowidigdo Northwestern University Ryan Nunn Brookings Institution Tom Orlik Bloomberg Matea Pender, The College Board George Perry Brookings Institution Jonathan Pingle BlackRock Eswar Prasad Brookings Institution Valerie Ramey University
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