Welcome! I am a Ph.D. candidate in economics at Columbia University. My research focuses on the areas of macroeconomics, monetary economics, behavioral macroeconomics, and international finance.
I am on the job market this fall and will be available for interviews at the 2019 EEA Job Market in Rotterdam and 2020 ASSA meetings in San Diego.
Analyses of the interaction between monetary and fiscal policy often turn crucially on assumptions that are made about outcomes far in the future, sometimes infinitely far. This is a problematic feature of rational-expectations analyses, given the limited basis for assumptions about the distant future. This paper instead considers both short-term effects and long-run consequences of alternative monetary and fiscal policies under an assumption of bounded rationality. In particular, it assumes that explicit forward planning extends only a finite distance into the future, with anticipated situations at that horizon evaluated using a value function learned from past experience. Such an approach makes announcements of future policies relevant, but avoids the debates about equilibrium selection that plague rational-expectations analyses. The combined monetary-fiscal regimes that result in stable long-run dynamics are characterized, and the effectiveness of temporary changes in either type of policy as a source of short-run demand stimulus is analyzed. The effectiveness of a coordinated change in monetary and fiscal policy is shown to be greatest when decision makers' degree of foresight is intermediate in range (average planning horizons on the order of ten years), rather than shorter or longer.
Abstract: We study the implications of global supply chains for the design of monetary policy, using a small-open economy New Keynesian model with multiple stages of production. Within the family of simple monetary policy rules with commitment, a rule that targets separate producer price inflation at different production stages, in addition to output gap and real exchange rate, is found to outperform alternative policy rules. As an economy becomes more open, measured by export share, the optimal weight on the upstream inflation rises relative to that on the final stage inflation. If we have to choose among aggregate price indicators, targeting PPI inflation is significantly better than targeting CPI inflation alone. As the production chain becomes longer, the optimal weight on PPI inflation should also rise. A trade cost shock such as a rise in the import tariff can alter the optimal weights on different inflation variables.
Abstract: Two strands of the literature suggest that PPI inflation, rather than CPI inflation, should be the targeting variable in a monetary policy rule. The distinction between these two rules would only be important if the two inflation indices do not co-move strongly. The first contribution of this paper is to document that the two inflation gauges did co-move strongly in the last century but the correlation has fallen substantially since the start of this century. The second contribution is to propose a structural explanation for this divergence based on the lengthening of world production chains since 2000. This theory implies that the decline in the correlation is likely to be permanent and a rethinking of the monetary policy rules has become more important. Our multi-stage multi-country production model has additional predictions on the behavior of CPI and PPI inflation beyond a fallen correlation, and these predictions are also confirmed in the data.
Abstract: This paper reviews a variety of alternative policy options under zero lower bound (ZLB) when the foresight of decision makers is limited. The existing theoretical analyses are mostly built upon rational expectations equilibrium (or model-consistent expectations), which is crucial to the predicted strong policy effects at the ZLB. By relaxing the assumption of perfectly model-consistent expectations in a particular way as in Woodford (2018), we find that recognizing that people’s planning horizons are finite can reduce, and may substantially reduce, the predicted effects of some much-discussed policies at the ZLB. The predicted “multiplier effect” of government purchases is reduced by short planning horizons. It remains the case that a commitment to monetary accommodation of fiscal stimulus can make it more effective. Recognizing that planning horizons may be relatively short for some strengthens the efficacy of systematic price-level targeting, as opposed to an ad hoc price-level targeting (temporary price-level targeting). The alternative policy options considered include strict inflation targeting; government purchases; debt-financed government transfer with inflation targeting, or with more accommodative monetary policy; ad hoc price-level targeting (temporary price-level targeting); and systematic price-level targeting.
Abstract: This paper proposes the following mechanism whereby polarization of beliefs could eliminate political gridlock instead of intensifying disagreement: the expectation of political payoffs from being proven correct by a policy failure could drive decision-makers who do not believe in the new policy to agree to policy experimentation, because they are confident that the experiment will fail, thus increasing their political power. We formalize this mechanism in a collective decision-making model in the presence of heterogeneous beliefs in which any decision other than the default option requires unanimity. We show that this consideration of political payoffs can eliminate the inefficiency caused by a unanimous consent requirement when beliefs are polarized, but could also create under-experimentation when two actors hold beliefs that differ only slightly from one another. We further show that this under-experimentation can be reduced when the political payoffs become endogenous. We illustrate the empirical relevance of the mechanism in two examples with historical narratives: we focus on the decision making process of the Chinese leadership during the country’s transition starting in the late 1970s, and we further apply the model to the disagreement within the leadership of the Allied Forces on the Western Front of World War II in the autumn of 1944.
Work in Progress:
- Monetary Policy and the Maturity of Corporate Debt
- Information Effect of Monetary Policy and Macroeconomic Uncertainty, with John Rogers and Bo Sun
- 2019 Spring, Money and Banking, TA for Tri Vi Dang
- 2018 Fall, Money and Banking, TA for Tri Vi Dang
- 2017 Fall, Principles of Economics, TA for Ron Miller
- 2017 Spring, Money and Banking, TA for Tri Vi Dang
- 2016 Spring, Intermediate Macroeconomics, TA for Prof. Martin Uribe
- 2015 Fall, Public Economics, TA for Prof. Wojciech Kopczuk