Striking While the Iron Is Cold: Fragility after a Surge of Lumpy Investments [appendix] [RePEc]
- R&R at Journal of the European Economic Association

• Winner of the Best Paper Award for Early Career Academics at the Econometric Society Australasia Meeting 2022

• Winner of the Hiram C. Haney Fellowship Award in Economics

• Winner of the Thomas J. Sargent Dissertation Fellowship at the Federal Reserve Bank of San Francisco.

This paper studies how large firms' synchronized lumpy investments endogenously shape an economy's fragility to negative TFP shocks. I develop a heterogeneous-firm real business cycle model that matches the empirical interest elasticities of investment for both large and small firms. In the model, large firms' lumpy investments become persistently synchronized due to their low sensitivity to general equilibrium effects, generating investment surges. Following these surges, TFP-induced recessions are particularly severe, and the semi-elasticity of aggregate investment drops significantly, consistent with the data.

Job market paper version: link

Global Nonlinear Solutions in Sequence Space and the Generalized Transition Function
[appendix] [sample codes] [slides] [RePEc]

This paper develops a unified framework for globally solving dynamic stochastic general equilibrium models with high accuracy and computational efficiency in sequence space. The method efficiently handles rich heterogeneity, nonlinearities such as occasionally binding constraints, and non-trivial market clearing conditions — without assuming perfect foresight. Building on this, I introduce the generalized transition function (GTF), defined as a sub-path of the recursive competitive equilibrium. The GTF nests generalized impulse responses and stochastic growth paths, enabling global analysis of state-dependent dynamics and the interaction between growth and uncertainty. Applications to heterogeneous-agent models with occasionally binding constraints and portfolio choice reveal rich equilibrium predictions driven by the cross-sectional heterogeneity — including uncertainty-driven dampened growth, endogenous disasters, state-dependent fiscal multipliers, heterogeneous portfolio adjustments over the business cycle, and state-dependent risk premium dynamics.

Bridging Micro and Macro Production Functions: The Fiscal Multiplier of Infrastructure Investment (with Minsu Chang) [appendix]
- Accepted subject to minor revision at Journal of Monetary Economics

This paper investigates the fiscal multiplier of infrastructure investment using an estimated heterogeneous-firm general equilibrium model. We show theoretically and quantitatively that the firm-level non-rivalry in infrastructure usage drives a significant discrepancy between the estimated input elasticities at the firm level and the state level. In addition, we link our firm-level production function to a canonical production function in a representative-agent framework (Baxter and King, 1993). The quantitative findings indicate a fiscal multiplier of approximately 1.09 over a 2-year horizon, suggesting a moderate net economic benefit from infrastructure investment, which is significantly higher than the representative-agent model prediction. This is due to the low sensitivity of the firm-level investment to the general equilibrium effect, leading to a dampened crowding out.

Top Income Inequality and the Business Cycle

This paper studies how the pass-through businesses of top income earners affect the aggregate fluctuations in the U.S. economy. I develop a heterogeneous-household real business cycle model with endogenous labor supply and occupational choice and calibrate the model to capture the observed top income inequality. Compared to the counterfactual economy with the factor-income-driven top income inequality, the economy in the baseline model features the aggregate fluctuations that outperform in explaining the recent changes in the business cycle: 1) lower volatility of aggregate output and 2) stronger negative correlation between labor hour and productivity. Heterogeneous labor demand sensitivities to TFP shocks between pass-through businesses and C-corporations build the core of the aggregate dynamics, and the aggregate employment dynamics display substantial nonlinearity due to this heterogeneity.

Disclosure Regulation, Intangible Capital and the Disappearance of Public Firms (with Sara Casella and Sergio Villalvazo) [appendix] [feds working paper] [slides]

Since the mid-1990s, the number of listed firms in the U.S. has halved, and their public disclosure has become opaquer. To explain these trends, we develop a general equilibrium model where the choices of going public or private and the transparency of voluntary disclosure are characterized analytically. In the equilibrium, the stock market with directed search and the private equity market with random search co-exist. Going public with transparent disclosure leads to greater funding at the cost of a firm’s competitiveness through knowledge spillover. According to the estimation, stricter disclosure regulation and increased intangible capital share are the key drivers of the observed patterns. Lastly, we characterize a policymaker’s trade-off between welfare and productivity and analyze the optimal disclosure policy.

Rising Intangibles and Technology-Biased Technical Change (with Jesús Fernández-Villaverde) 

An Analytic Theory of Frictional Firm Dynamics (with Vasco M. Carvalho) 

From Spreads to Spirals: How Financial Frictions Drive Lumpy Investments (with Miguel H. Ferreira and Timo Haber) 

Endogenous Job Separation and the Nonlinear Nature of the Beveridge Curve (with Philip Schnattinger and Francesco Zanetti) 

Global Nonlinear Equilibrium Dynamics and the Zero Lower Bound (with Kao Nomura) 

Heterogeneous Households and Aggregate Dynamics: Analytical Moment Recursion