Russell TN Wong, PhD Economist

Russell TN Wong

Senior Economist, Federal Reserve Bank of Richmond

email: Russell.Wong(at)rich(dot)frb(dot)org

Guest Editor of Journal of Economic Theory, Special Issue of Models of Decentralized Markets

Associate Editor of Economic Modelling, 經濟研究

Official page at Federal Reserve Bank

Jonathan Chiu (BoC), Todd Keister (Rutgers) and I organize a seminar series on central banking and digital currencies (CB&DC)

Follow my babbling on Twitter@TszNgaWong

Research

Decentralized Mass Movement and Tullock's Paradox with Pui-Hang Wong (Maastricht)

Status: preparing

Liquidity Traps and the Perils of Macroprudential Policy: Theory and Evidence from China

Status: preparing

Leveraging the Disagreement on Climate Change: Theory and Evidence, 2023, with Laura Bakkensen (U of Arizona) and Toan Phan (FRB Richmond)

Status: R&R, JPE

Agents have different beliefs about the timing of a disaster that will wipe off some asset value. To finance the asset purchase, agents can search for a lender of defaultable long-term debt. In the competitive equilibrium of short-term debt (a la Geanakoplos model), the optimistic agent takes out a larger debt to purchase the asset. However, in the competitive search equilibrium, the pessimistic agent (believing the disaster will arrive soon) is more likely to take out a debt with a longer term, which increases the exposure to the disaster risk. We find strong evidence of this mechanism in the U.S. mortgage markets exposed to the risk of the sea-level rise.

Severance Pay in an Optimal Contract, 2023, with Borys Grochulski (FRB Richmond) and Yuzhe Zhang (TAMU)

Status: R&R, AEJ Micro

Consider the dynamic contract of moral hazard with the exogenous risk of terminating the contract. In the optimal contract, the termination event can sometimes push up the continuation value of the agent. The model explains the use of non-voluntary severance pay in the labor market and how the amount varies with tenure and job characteristics.

Money with No Future

Status: preparing

The conventional wisdom of money is that money requires an infinite horizon to arise endogenously: "I was willing to hold money yesterday because I believed the dentist would accept it today. She is willing to hold money today because she believes someone else will accept it tomorrow...." I show a fairly modest condition under which this wisdom is not necessary. The key is that when trading opportunities are dense (e.g. continuous time), and the marginal utility approaches infinity sufficiently fast at zero (like Inada condition), money can have a positive value in a finite horizon. There is a continuum of finite-horizon monetary equilibria, give rise to dynamic indeterminacy. Adding sentiment shocks a la Brownian sunspots. I provide the closed-form solutions of the failure probability, seignorage, long-run market cap, and welfare as the functions of the current market cap. More volatile sentiments can prolong the survival probability and increase the long-run market cap. The model explains how cryptocurrencies fluctuate and fail like Terra UST: a small self-fulfilling run on the algo stablecoin can kick off a countdown to its float-coin, the dynamics the standard infinitely-live money cannot capture.

Disintermediating the Federal funds market, with Mengbo Zhang (SUFE)

Status: preparing

Lending Relationships and Optimal Monetary Policy, with Zach Bethune (UVA), Guillaume Rocheteau (UC Irvine) and Cathy Zhang (Purdue); online appendix and Stata data

Status: REStud 2022

Payments on Digital Platforms: Resilience, Interoperability and Welfare, with Jonathan Chiu (Bank of Canada)

Status: JEDC 2022

An Heterogeneous New Monetarist Model with an Application to Unemployment, with Guillaume Rocheteau (UC Irvine) and Pierre-Olivier Weill (UCLA)

Status: JME 2021 and NBER WP

Eggs in One Basket: Security and Convenience of Digital Currencies, with Charlie Kahn (UIUC) and Francisco Rivadeneyra (BoC)

Status: St Louis Fed Working Paper

Contingent Debt and Performance Pricing in an Optimal Capital Structure Model with Financial Distress and Reorganization, with Borys Grochulski (FRB Richmond)

Status: FRB Richmond working paper