Research
Working papers
Abstract
I study the implementation of several monetary policies when firms hold heterogeneous beliefs about the future. The new Survey of Firms' Inflation Expectations (SoFIE) shows direct evidences of the heterogeneity among firms' beliefs about the future when facing a shock, the impact of this fact on monetary policy needs to be investigated. This paper proposes an extended NK model with this heterogeneity. With this extended NK model, I have found that i) in the log-linearized framework, a new term indicating an extra weight on inflation deviation is necessary in the loss function of the central bank to fully capture the utility loss of households; ii) the gain of implementing forward guidance is underestimated; iii) by publishing its own projection for the future fundamentals, the central bank can significantly improve social welfare.
"Social Mobility and Political Stability"
Abstract
This paper investigates when a revolution happens in an economy consisting of elites and ordinary citizens, without any external shock such as a foreign intervention. In this economy, elites take proportionally larger incomes and so, there are strong incentives for them to implement nepotism that keeps their own children in the elites. However, nepotism leads to a decline in the quality of the leadership of elites. Accordingly citizens can initiate revolution to take a greater share of total income. As the leadership of elites degenerates, the difficulty of undertaking a revolution declines and once it is low enough, the revolution happens. However, social mobility represents an institutional constraint on how much nepotism can be implemented, thus, it affects when the revolution happens or even prevents the conditions for revolution. In this context, it is shown that there is an optimal scheme to increase social mobility and an optimal scheme to avoid revolution.
"Embedded Autonomy, Political Institutions and Access Orders", with Professor N. Singh
Abstract
We construct a model of "embedded autonomy", the idea that closeness of bureaucrats and business people may lead to growth-promoting policies by the government, though at the risk of leading to crony capitalism. We analyze how the level of monitoring to control corruption and the weight given to the future affect the nature of the possible outcomes. We explore possible tradeoffs between growth and inclusiveness, and discuss how our model relates to more general concepts of inclusiveness of institutions, as framed by Acemoglu and Robinson, or the nature of "access orders", as introduced by North, Wallis and Weingast.
Work in Progress
"A Model of Embedded Autonomy and Asymmetric Information", with Professor N. Singh
Abstract
We model the concept of embedded autonomy, introduced by Peter Evens, as an interaction between bureaucrats and entrepreneurs, where bureaucrats must approve projects proposed by entrepreneurs. Entrepreneurs are better informed about their own projects than are bureaucrats, but bureaucrats can receive signals about project quality from entrepreneurs. If bureaucrats and entrepreneurs are more closely connected, say through social ties, they receive more informative signals. However, greater closeness will simultaneously relax the standards for project approval. Hence, there is a tradeoff between these two effects of social closeness, which helps capture the concept of embedded autonomy.