Taxing Sudden Capital Income Surges (with Jianjun Miao), 2025, IMF Economic Review
Taxing sudden capital income jumps can be efficient and redistribution-friendly. It can be implemented by taxing revenues (not profits) above a certain level and/or capital gains tax for gains above a certain threshold.
[Research summary] · [Published article] · [Working paper version]
Capital Income Jumps and Wealth Distribution (with Jess Benhabib and Jianjun Miao), 2024, Quantitative Economics
Wealth accumulation at the very top is now increasingly relying on entrepreneurship. When capital income has jump risks, we build a tractable incomplete market model that can match the wealth distribution in the US, including the top 1% and top 0.1%. We show that the wealth tail can be thicker under some conditions than the income tail.
[Research summary] · [Published article] · [Working paper version]
Endogeneous Liquidity and Capital Reallocation (with Randall Wright and Yu Zhu), 2025, Journal of Political Economy
The paper documents new long-run / short-run reallocation and cost of liquidity features. It provides a tractable search type of quantitative model. We highlight the importance of search and liquidity in determining the types of reallocation, i.e., acquisition and partial sales. A new reallocation trade-off faced by monetary policy makers.
[Research summary] · [Published article] · [Replication data]
A Ramsey Theory of Financial Distortions (with Marco Bassetto), 2024, Journal of Political Economy
When financing constraints are tied to asset liquidity, capital tax can be used together with low interest rates.
[Research summary] · [Published article] · [Working paper version] · [Replication data]
Macroeconomic Effects of Delayed Capital Liquidation, 2022, Journal of the European Economic Association
previous version: Delayed Capital Reallocation [paper]
[Research summary] · [Published article]
Quantitative Easing with Heterogeneous Agents (with Vincent Sterk), 2021, Journal of Monetary Economics
VoxEU column: https://voxeu.org/article/powers-and-pitfalls-quantitative-easing
A tractable heterogeneous-agent model for evaluating the effect of quantitative easing (i.e., deposit creation arising from swapping reserves and long-term government debt). Although QE is effective during the recession, there are substantial side effects of QE through adversely affecting the wealth distribution.
[Research summary] · [Published article] · [code]
Default Cycles (with Leo Kaas), 2020, Journal of Monetary Economics
This paper develops a tractable macroeconomic model in which persistent default cycles are the outcome of variations in self-fulfilling sunspot beliefs about credit market conditions.
[Research summary] · [Published article]
Search-based Endogenous Asset Liquidity and the Macroeconomy (with Sören Radde) , 2019, Journal of the European Economic Association
An RBC model of procyclical asset liquidity and asset price through costly search.
[Research summary] · [Published article]
The Fiscal Theory of the Price Level in a World of Low Interest Rates (with Marco Bassetto), lead article, Journal of Economic Dynamics and Control, 2018, Special issue on ``Fiscal and Monetary Policies''.
See the discussion [paper] by Stephen Williamson
[Research summary] · [Published article]
Monetary–Fiscal Interactions with Endogenous Liquidity Frictions, lead article, European Economic Review, 2016
Government debt as liquidity, financing constraints, and non-Ricardian fiscal effects.
[Research summary] · [Published article]
Money and Asset Liquidity in Frictional Capital Markets (with Sören Radde); American Economic Review, May Issue, 2016
A competitive asset search framework to endogenize asset liquidity and financing constraints. We show the possibility of multiple equilibria and the macro-financial system linkages.
[Published article] · [appendix]
Two Engines, One Boom: Disentangling Credit's Real Effects: A Discussion of “Quantifying the Macroeconomic Impact of Credit Expansions”, 2025, International Economic Review
Stablecoins or CBDC can crowd in credit demand though they crowd out credit supply (disintermediation). The effect heavily depends on banking competition and fiscal budget.
Cutting the interest rate could be a bad idea already in a low-interest-rate environment, as it can discourage risk-taking. In the aggregate, we can have a humped IS curve and an optimal level of interest rate. The optimal rate depends on credit limits and correlations among risky projects.
Government Bond Liquidity and Sovereign-Bank Interlinkages [paper] (with Sören Radde and Cristina Checherita-Westphal), SFB working paper
Sovereign insolvency reduces the liquidity of sovereign bonds in the search market. Banks fly to liquidity, and some investment will not be financed. Then, output drops and the tax base will shrink which further amplifies the insolvency issue.
Estimation of NAIRU with Inflation Expectation Data [paper], joint with Wolfgang Hardle and Weining Wang