Nicolai Waldstrøm

Nicolai Waldstrøm

PhD fellow in Macroeconomics

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.


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


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.

Firm Heterogeneity and the Transmission of Foreign Supply Shocks (2023)
with Christian B. Kastrup. Work in progress.

In this paper, we investigate the role of within-sector heterogeneity in the transmission of foreign supply shocks. We start by establishing causal evidence of how a 10% increase in import prices leads to a 7% decline in real output and a 2.5% increase in prices. We then develop a partial equilibrium model that captures the heterogeneity within sectors, with firms varying across five dimensions: productivity, materials share, import share, export share, and IO-linkages. Our findings reveal that within-sector heterogeneity amplifies the response to foreign shocks by 32% in partial equilibrium. This amplification occurs primarily because larger firms also import the most. However, when considering the broader implications in general equilibrium, a counter-intuitive result emerges. Within-sector heterogeneity dampens the impact of foreign shocks by 11% in this setting. This surprising effect is attributed to the fact that larger firms, while import-intensive, are less intertwined with the domestic economy. In summary, our study underscores the complex interplay of within-sector heterogeneity in the transmission of foreign supply shocks, demonstrating its amplifying effect in partial equilibrium and its contrasting dampening effect in general equilibrium.

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

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.


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


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