Economic models
-
Vertical Specialization and Gains from Trade
Multi-stage production is widely recognized as an important feature of the modern global economy. This feature has been incorporated into many state-of-the-art quantitative trade models, and has been shown to deliver significant additional gains from international trade. -
Constrained Efficiency with Adverse Selection and Directed Search
Constrained efficient allocation (CE) is characterized in a model of adverse selection and directed search (Guerrieri, Shimer, and Wright (2010)). CE is defined to be the allocation that maximizes welfare, the ex-ante utility of all agents, subject to the frictions of the environment. -
Stability and Efficiency in Decentralized Two‐Sided Markets with Weak Preferences
Many decentralized markets are able to attain a stable outcome despite the absence of a central authority (Roth and Vande Vate, 1990). A stable matching, however, need not be efficient if preferences are weak. This raises the question whether a decentralized market with weak preferences can attain Pareto efficiency in the absence of a central matchmaker. -
Information Sharing and Bargaining in Buyer-Seller Networks
This paper presents a model of strategic buyer-seller networks with information exchange between sellers. Prior to engaging in bargaining with buyers, sellers can share access to buyers for a negotiated transfer. We study how this information exchange affects overall market prices, volumes and welfare, given different initial market conditions and information sharing rules. -
Can the Common-Factor Hypothesis Explain the Observed Housing Wealth Effect?
The common-factor hypothesis is one possible explanation for the housing wealth effect. Under this hypothesis, house price appreciation is related to changes in consumption as long as the available proxies for the common driver of housing and non-housing demand are noisy and housing supply is not perfectly elastic. -
Producer Heterogeneity, Value-Added, and International Trade
Standard new trade models depict producers as heterogeneous in total factor productivity. In this paper, I adapt the Eaton and Kortum (2002) model of international trade to incorporate tradable intermediate goods and producer heterogeneity in value-added productivity. -
Comparing Forward Guidance and Neo-Fisherianism as Strategies for Escaping Liquidity Traps
What path should policy-makers select for the nominal rate when faced with a liquidity trap during which the effective lower bound binds? -
Business Cycles in Small, Open Economies: Evidence from Panel Data Between 1900 and 2013
Using a novel data set for 17 countries dating from 1900 to 2013, we characterize business cycles in both small developed and developing countries in a model with financial frictions and a common shock structure. We estimate the model jointly for these 17 countries using Bayesian methods. -
Fragility of Resale Markets for Securitized Assets and Policy of Asset Purchases
Markets for securitized assets were characterized by high liquidity prior to the recent financial crisis and by a sudden market dry-up at the onset of the crisis. A general equilibrium model with heterogeneous investment opportunities and information frictions predicts that, in boom periods or mild recessions, the degree of adverse selection in resale markets for securitized assets is limited because of the reputation-based guarantees by asset originators. -
Interpreting Volatility Shocks as Preference Shocks
This paper examines the relationship between volatility shocks and preference shocks in an analytically tractable endogenous growth model with recursive preferences and stochastic volatility. I show that there exists an explicit mapping between volatility shocks and preference shocks, and a rise in volatility generates the same impulse responses of macroeconomic aggregates as a negative preference shock.