In the past three decades, international business cycles have become highly synchronized across countries. However, there is a lack of consensus on whether this is due to an increase in the correlation of country-specific shocks or due to increased economic integration. To understand this empirical phenomenon, I develop a multi-country real business cycle model with international trade that captures several potential explanations: shocks to productivity, demand, leisure, investment, sectoral expenditures, and trade-linkages. Then I match the data exactly with the endogenous outcomes of the model so that shocks fully account for the data, including GDP and trade shares. Calibrating the model to a panel of developed (G7) countries during 1992-2014, I find that trade-linkage shocks, which capture increased economic integration and the volatility of trade flows, are essential in synchronizing international business cycles. In contrast, correlated country-specific shocks play relatively minor roles. This suggests that trade shocks due to economic integration have been the primary driver of the co-movement of international business cycles. Furthermore, I use my model to address the trade co-movement puzzle, which states that international real business cycle models should be predicting a much stronger link between trade and cross-country GDP correlations. Once I account for the trade-linkage shocks, the model predicts a strong link between trade and business cycle co-movement. This finding suggests that incorporating the dynamics of trade shocks is crucial when studying international business cycles.
WORK IN PROGRESS
"Global and Local Effects on the Labor Share Decline" - with Chung Han Yang
Stable labor shares in national income have been one of the main stylized macroeconomic facts of the 20th century, first established by Kaldor (1961). However, this fact has been challenged; we observe that the labor shares have been declining since the 1980s across the world. Yet, there is still a lack of consensus on why the world is experiencing this global empirical phenomenon. To answer this question, we develop a multi-country dynamic trade model with firm heterogeneity that incorporates various shocks that capture the competing stories in the literature: (i) the rise of superstar firms, (ii) changes to composition in consumption, (iii) fall in prices of capital/investment, and (iv) increase in international trade. To back out the wedges that capture these stories, we saturate the model by matching the model's endogenous outcomes with each country's GDP, investment, compensation of employees, and bilateral trade shares exactly.
"Intra-household Inequality and Gender-Equitable Inclusive Growth" - with Gee Young Oh
As the world has experienced large economic growth, labor force participation for females has been increasing but consistently lower than that of males across many countries suggesting that the growth may lack inclusivity in terms of gender. This paper offers new insights about achieving inclusive economic growth in terms of gender equity by tying it to achieving equality between females and males in households. Through the lens of a structural household model, we study how intra-household inequality, in aggregate, affects gender-equitable inclusive growth. By investigating gender-bias parameters in the household model, we examine how resolving the micro-level inequality resolves the aggregate level inequality in gender gaps in labor force participation.
"Disentangling the Impact of Trade and Financial Sanctions: Evidence from Iran" - with William Walsh
What are the macroeconomic impacts of economic and financial sanctions? Developed countries widely use trade and financial sanctions to put political pressure on targeted countries, but little is known about these sanctions' effects on the macroeconomy. In particular, we study the 2012 recession in Iran and the European Union's trade and financial sanctions. Did internal shocks cause the recession in Iran, or did the imposed sanctions have a bite? To answer this question, we build a small open economy model that fully account for GDP, consumption, employment, and net exports of Iran to disentangle the impacts of the Iranian recession. In our counterfactual analysis, we study how Iran’s GDP and consumption would have evolved if the E.U. had not imposed the sanctions.
Controlled School Choice with Mixed Bounds Approach: A Balance between Stability and Diversity Considerations (B.S. thesis at Carnegie Mellon University)
Controlled school choice over public schools has been an important concern for both the parents of students and schools. It gives numerous options for how fairness and diversity considerations can be balanced. The notion of diversity is often imposed by limiting the number of admitted students who have the same type (quotas), or by reserving seats for each student type (reserves). The controlled school choice rule that I explore in this paper is the combination of “reserves” and “quotas,” where schools implement minimum reserves (a soft bound) and maximum quotas (a hard bound) together. In this paper, I provide a full characterization of the mixed bounds approach, and show that it satisfies the requirements for the existence of a student-optimal stable matching.