Research

Markup, Customer Base, and Firm Dynamics, Job Market Paper, 2020

This paper studies the effect of market power from demand accumulation on markup cyclicality and lifecycle behavior of firms. I document two pieces of new empirical evidence: (i) individual firm markup is countercyclical to productivity and monetary policy shocks, and (ii) smaller firms have more countercyclical markups in response to the shocks. To explain the new evidence, I propose a firm dynamics model with the customer base and endogenous entry and exit. In my model, the customer base makes the firm pricing problem dynamic, so firms compare current profit and the value of the customer base when they set markup. The model is consistent with the data and can match age-dependent growth and selection of firms.

Forward Guidance under HANK & SAM, 2020

I study the effect of forward guidance in a framework that has an incomplete market and endogenous income risk (HANK&SAM). By expressing the equations as functions of the deep parameters of the model, I obtain three results. First, I show that countercyclical income risk aggravates the forward guidance puzzle. Second, I find that income risk is weakly countercyclical under a standard calibration of the model. Third, I show how the effect of monetary policy changes due to the difference in the marginal propensity to consumption under the framework.

Short Run Firm Responses to Tax Shock, 2020

This paper studies the near term firm-level cumulative and non-cumulative responses to corporate tax shocks. Using a panel version of local projection with an instrument variable, I find that firms increase intangible and tangible investment, labor costs, and output, whereas decrease leverage. To the tax cut, measured firm revenue productivity and measured markup increase, but firm churn is stable to the tax cut. I furthermore document that cumulative change is more persistent than non-cumulative change. Extrapolating our estimates, I predict that the effect of the 2017 Tax Cuts and Jobs Act is significant.