Russell TN Wong
Senior Economist, Federal Reserve Bank of Richmond
email: purpleteeth(plus)JET(at)gmail(dot)com
Guest Editor of Journal of Economic Theory, Special Issue of Models of Decentralized Markets (with Ricardo Lagos, Guido Menzio, and Guillaume Rocheteau)
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
Theme: I am interested in studying frontier risks (e.g. crypto, climate change, China, AI, political polarization, etc) and their policy implications when markets are frictional, fragmented, and decentralized.
Decentralized Mass Movement and Tullock's Paradox with Pui-Hang Wong (Maastricht)
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.
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.
Liquidity Traps and the Perils of Macroprudential Policy: Theory and Evidence from China
Status: preparing
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
Should the Central Bank Issue E-money, with Charlie Kahn (UIUC) and Francisco Rivadeneyra (BoC).
Status: Journal of Financial Market Infrastructures 2019
Mismatch and Aggregate Productivity, 2018, with Ping Wang (Wash U) and CK Yip (CUHK).
Status: NBER WP
Self-Insurance and the Risk-Sharing Role of Money, 2018
Status: Richmond Fed Economic Quarterly
Working Through Distribution: Money in the Short and Long Run, revised 2018, with Guillaume Rocheteau (UC Irvine) and Pierre-Olivier Weill (UCLA)
Status: expanded into "A Heterogeneous New Monetarist Model with an Application to Unemployment" and NBER WP
A Tractable Model of Monetary Exchange with Ex-post Heterogeneity, with Guillaume Rocheteau (UC Irvine) and Pierre-Olivier Weill (UCLA) , slide, math appendix, numerical appendix
Status: TE 2018 and NBER WP version
Estimation and Inference of Threshold Regression Models with Measurement Errors, with Terrence Chong (CUHK), Haiqiang Chen (WISE) and Isabel Yan (CityU HK)
Status: SNDE 2018
Monetary Exchange and the Irreducible Cost of Inflation
Status: JET 2016
A Tractable Monetary Model under General Preference, slides, online appendix and data
Status: REStud 2016
On the Essentiality of E-money, 2017 revised, with Jonathan Chiu (Bank of Canada)
Status: BoC WP
E-Money: Efficiency, Stability and Optimal Policies, 2013, with Jonathan Chiu (Bank of Canada)
Status: BoC WP
Indeterminacy and the Elasticity of Substitution in One-sector Models, with CK Yip (CUHK)
Status: JEDC 2012
Policy Writing
Can China Avoid a Liquidity Trap?
Crypto Conglomerate: Economics and Regulations
Federal Reserve as The Borrower of Last Resort
Why Stablecoins Fail: An Economist’s Post-Mortem on Terra
A Historical Perspective on Digital Currencies
SWIFT, Sanctions and Dollar's Dominance
Should the Fed Issue Digital Currency? Some Considerations
Monetary Policy and Small Business
Institutional Barriers and World Income Disparities
Teaching
A reading list of recent works on innovation and endogenous growth
ECON820 Money in the Macroeconomy, for grad 2015, Queen's University
ECON1011 Introduction to Microeconomics, for undergrad 2011, Washington University in St Louis
Education
Ph.D. in Economics, 2012, (Washington U in St Louis)
B. Soc Sci and M. Phil in Economics, 2007 (Chinese U of Hong Kong)