This paper studies how an endogenous longevity channel, the partial control of life expectancy through preventive health investment, shapes macroeconomic outcomes and policy design. I first study how health investments affect individual saving decisions in a two-period model where survival probabilities depend on prevention. Endogenous longevity creates a non-linear asset-income relationship: health spending depresses saving and yields concavity at low incomes, while longer expected lifespans raise the value of saving and generate convexity at higher incomes. Embedding this mechanism into a neoclassical OLG model, I then examine its implications for macroeconomic policy design. When annuity markets are incomplete, individuals who extend their lifespans fail to internalize the social costs associated with longer survival. Thus, under an optimal policy regime, efficiency requires a positive tax on health investment. In more realistic second-best settings, however, health subsidies become optimal, as they both improve efficiency by compensating for annuity imperfections and enhance equity by narrowing longevity and income inequality. I then build a quantitative model disciplined by U.S. data to assess two applications: (i) how the endogenous longevity channel alters the contribution of demographic and inequality trends to the rise in aggregate saving and decline in real interest rates over the past five decades, and (ii) the welfare effects of alternative policy reforms in preventive health subsidies.

We study the design of monetary policy when the private sector is uncertain not about the desired long-run inflation target but rather how strongly the central bank prioritizes inflation stability in response to shocks. A higher perceived commitment—a hawkish reputation—reduces stabilization costs by dampening the pass-through of shocks to short-run inflation expectations. Because policy actions influence both current outcomes and beliefs, the optimal response to cost-push shocks is more aggressive than that of a myopic policymaker with identical preferences. The bank internalizes the value of reputation. Using cross-sectional variation in U.S. forecasts of inflation and output, we construct an empirical measure of our notion of reputation and show it broadly supports the theoretical mechanisms. A quantitative exercise shows that delegation to a conservative central banker as in Rogoff (1985) it not perfect, but closely approximates the optimal policy.

Why do two out of three Americans claim Social Security benefits before reaching their Full Retirement Age? Why do even sufficiently rich people claim early very often? This paper resolves this puzzling phenomenon by extending a standard incomplete markets life-cycle model to incorporate health dynamics and bequest motives. Relative to the existing literature, health plays a broader role, affecting not only medical expenses and mortality but also directly the marginal utility of consumption. This role of health is disciplined using microdata on consumption, assets, income, and health from the Health and Retirement Study (HRS) and the Consumption and Activities Mail Survey (CAMS). The calibrated model successfully replicates the fraction of early claimers. Counterfactual exercises show that health-dependent preferences and bequest motives are crucial for this result. The model’s success is explained by a novel channel that comes from the interaction between the negative effect of worsening health on the marginal utility of consumption, the downward health trend because of aging, and bequest motives. These two elements reduce the gains from delaying by 1) making individuals more impatient and 2) increasing the strength of bequest motives relative to future consumption. The results suggest that governments aiming to insure against longevity must consider the complementary interaction between individual incentives to insure against longevity and health risks.

Due to structural characteristics such as foreign-currency debt and shallow domestic financial markets, emerging market economies are particularly vulnerable to external shocks. This paper examines the stabilization role of foreign exchange (FX) intervention following an increase in the foreign interest rate. I develop a small open economy model with market segmentation and financial frictions, in which banks are forward-looking and subject to balance sheet effects stemming from exchange rate movements. First, we show that incorporating balance sheet effects allows the model to replicate the empirical response of the uncovered interest parity (UIP) premium to foreign interest rate shocks. An unexpected exchange rate depreciation lowers banks' net worth and raises the UIP premium. Second, we investigate the effectiveness of FX intervention policies in this setting, finding that balance sheet effects are not important in shaping the general equilibrium responses, but the banks’ forward-looking behavior is. Finally, we compare the performance of several FX intervention rules proposed in literature and policy.

We examine the role of sterilized FX interventions as a monetary policy tool in response to external shocks for dollarized emerging market economies. Our model highlights an agency problem that limits banks’ ability to secure funds in both domestic and foreign currencies, with its intensity linked to currency mismatches in the banking sector. This leads to endogenous deviations from the standard UIP condition, resulting in a non-neutral FX intervention policy. Sterilized FX interventions stabilize financial conditions not only by stabilizing real exchange rates but also by acting as a balance sheet policy that directly influences credit supply. Our quantitative analysis shows that FX policy rules that counteract exchange rate deviations reduce volatility in interest rate spreads including UIP deviations, credit, investment, and output, leading to significant welfare improvements compared to a flexible exchange rate regime.