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  • What do inventories tell us about news-driven business cycles?
    Journal of Monetary Economics, 79, May 2016, 49-66 (with Nicolas Crouzet).
    Old version    Old appendix    Replication files

    Abstract: There is widespread disagreement over the quantitative contribution of news shocks to business-cycle fluctuations. This paper provides a simple identifying restriction, based on inventory dynamics, that tightly pins down this contribution. Structural models predict that finished-good inventories should fall when there is an increase in consumption and investment induced by news shocks. A structural VAR with these sign restrictions indicates that news shocks account for at most 20 percent of output volatility. Since inventories comove positively with consumption and investment in the data, shocks that generate negative comovement cannot account for the bulk of fluctuations.

  • Targeted transfers and the fiscal response to the great recession
    Journal of Monetary Economics, 59(S), December 2012, S50-S64 (with Ricardo Reis).
    VoxEU column    Working paper version    Appendix    Replication files     

    Abstract: Between 2007 and 2009, government expenditures increased rapidly across the OECD countries. While economic research on the impact of government purchases has flourished, in the data, most of the increase in expenditures was in government transfers. After documenting this fact, we argue that future research should focus on the positive impact of transfers. Towards this, we present a model in which there is no representative agent and Ricardian equivalence does not hold because of uncertainty, imperfect credit markets, and nominal rigidities. Targeted lump-sum transfers are expansionary both because of a neoclassical wealth effect and because of a Keynesian aggregate demand effect.
  • Time to build and the real-options channel of residential investment
    August 2018 (with Chamna Yoon). [2nd round R&R at Journal of Financial Economics]

    Abstract: A standard real-options model predicts that time-to-build investment could be delayed by uncertainty over future revenue. We quantify the first-order importance of this mechanism in the recent housing boom-bust cycle by developing and estimating a model of sequential irreversible investment with stochastic bottlenecks. We find that the main driver of construction delays during the boom is construction bottlenecks. However, further delay in construction during the bust is caused by an increase in uncertainty, which grew by 21.6% between 2002 and 2009. The model can account for more than one-third of the decline in residential investment between 2002 and 2009.


  • The role of durables replacement and second-hand markets in a business-cycle model
    March 2018. [R&R at Journal of Money, Credit and Banking]

    Abstract: Transactions of used durables are large and cyclical, but their interaction with purchases of new durables has been neglected in business-cycle studies. I fill in this gap by introducing a new business-cycle model of durables where households resell their goods to the second-hand market and the production of new durables is affected by the supply of used goods. The model delivers three conclusions: markups are smaller for goods that are more durable and more frequently replaced; markups are countercyclical for durables, resolving the comovement puzzle of Barsky, House, and Kimball (2007 American Economic Review); and procyclical replacement demand amplifies durable spending.

  • The international diffusion of the automobile from 1913 to 1940
    preliminary draft (with Dong ChengMario Crucini, and Hakan Yilmazkuday).

  • The effective interest rate lower bound in a small open economy: The case of Korea
    September 2018 (with Young-Kwan Kang).

    Abstract: We estimate the macroeconomic effect of monetary policy shocks in Korea using a vector autoregressive model, allowing for differential effects when the policy rate in Korea is close to the US federal funds rate. We find that the Korea-US policy rate difference matters for the response of output. Lowering the policy rate boosts production only when the Korea-US policy rate difference is notably large. Our empirical results suggest that the US federal funds rate is an effective lower bound for discretionary monetary policy in Korea. 

  • Seasonal cycles and the timing of residential investment
    (with Chamna Yoon).

  • Inventory disinvestment spikes
    (with Nicolas Crouzet).