Liquidity, Unemployment, and the Stock Market, joint with William Branch, Slides
Interest-rate spreads and the unemployment rate vary negatively with stock prices. Liquidity plays a role in a Mortensen-Pissarides economy with a twist: households self-insure against preference shocks by accumulating equity claims. Higher stock market valuations relax liquidity constraints, creating an aggregate demand channel that strengthens firms' hiring incentives. Quantitatively, a negative shock to stocks decreases the liquidity value of equity and increases unemployment. A ``perfect storm'' of an increase in risk and a drop in the velocity of publicly-provided assets produces a self-fulfilling crash to an equilibrium with high unemployment and low stock prices. Fragile economies rely on privately-issued assets.
(Presented at the 2017 Midwest Macroeconomics Conference, Baton Rouge; 2017 Society for Computational Economics Conference, New York)
Consumption variety from Shopping Time and Product Creation in an estimated model
Shopping time lacks strong positive comovement with either output or business formation. I develop and estimate by Bayesian means a multisector model in which product diversity arises from both shopping time and firm entry and investigate its ability to match these and salient features of the aggregate data. I compare the full model to alternatives in which either shopping time or firm entry is absent. The baseline generates mildly procyclical firm entry and shopping time and flat correlation of these two series. Demand shocks induce firm entry, and shopping time is less procyclical in the baseline model than the no-entry variant.
Unsecured Credit, Product Variety, and Unemployment Dynamics, Macroeconomic Dynamics , Online Appendix
(Presented at the 2016 Midwest Macro Workshop; 2016 West Coast Search and Matching Workshop, San Francisco Federal Reserve; 2016 Western Economics Association International, Portland)
Corporate Finance, Monetary Policy, and Aggregate Demand Journal of Economic Dynamics and Control, Slides
(Presented at the 2019 Western Economics Association International, San Francisco; the 2018 Society of Economics Dynamics Conference, Xiamen; Ashoka University)
New Monetarism with Endogenous Product Variety and Monopolistic Competition, Journal of Economic Dynamics and Control
(Presented at the 2015 Spring Midwest Macro Workshop, St. Louis; 2015 Search, Money, Liquidity, and Finance Workshop for PhD Students, UC Irvine)
Decentralizing Constrained-Efficient Allocations in the Lagos-Wright Pure Currency Economy, joint with Ayushi Bajaj, Guillaume Rocheteau, and Tai-Wei Hu, Journal of Economic Theory
Work in Progress
Unemployment Dynamics with Endogenous TFP and Input-output Links, joint with Miroslav Gabrovski
We incorporate input-output links and sunk entry costs in an otherwise standard labor search model. This generates an endogenous-productivity channel and sluggish adjustment. The model can explain the procyclical share of intermediate goods and the countercyclicality of intermediate goods prices, the hump-shaped response of market tightness, imperfect comovement of unemployment and productivity, and persistent effects of a sectoral shutdown.
(Presented at the UC Irvine virtual Macroeconomics Workshop, 2020)
Shopping Time, Net Product Creation, and the Productive Role of Demand
(Presented at Tongji University, 2019; Shanghai University of Finance and Economics, 2019)