"Market Incompleteness and Output Volatility " July 2006
Abstract: I calibrated the credit market constraint model with the
OECD countries' data and find that, conditional on the size of aggregate shock,
country with higher credit market participation rate would generally have lower
output volatility.
"Evaluating the Welfare Change of Economic Reform in China:
A Consumption Based approach," with Chunyu Ho and Dan Li. July 2006
Abstract:
This paper employs the consumption based model to conduct welfare analysis and
policy evaluation for economic reform initiated in 1979 using the national and
provincial consumption data. We find that (1) the welfare gain from eliminating
consumption volatility at provincial level is higher than that at national level
due to the market incompleteness at the provincial level; (2) the welfare cost
of consumption volatility is higher for provinces in the eastern region where
the consumption volatility is higher; (3) the welfare gain of extra 1%
consumption gain is higher for provinces in western region where the consumption
growth is lower. The policy evaluation shows that the economic reforms improve
the welfare through both reducing the business cycle fluctuation and enhancing
growth. In particular, the reforms reduce a large portion the welfare cost from
business cycle fluctuation such that further gain in this margin is limited.
Therefore, the government should focus on increasing economic growth in the
current development plan.
"The Real Effects of Inflation in Continuous
versus Discrete Time Sticky Price Models,"
with James Yetman. Invited Submission, Managerial and Decision Economics
Abstract:
We demonstrate the important implications of the assumption of discrete time in
many sticky price models of the macroeconomy. For a given level of menu costs,
discrete time models imply longer average contract length but smaller real
effects of both trend inflation and monetary shocks than continuous time models.
It is also feasible for a firm to enjoy full price flexibility in discrete time,
while this would require paying infinite menu costs in continuous time, a
distinction that is most important at high levels of trend inflation.
