Research Statement

Publication

Productive Demand and Sectoral Capacity Utilization

Joint with Marshall Urias — Economic Modelling, 2025

This article examines how capacity utilization disciplines the transmission of demand shocks to measured productivity when goods market frictions exist. We develop a three-sector model incorporating goods market frictions across nondurable goods, durable goods, and services. Using Bayesian techniques, we estimate the model using data on sectoral capacity utilization (nondurables and durables), consumption, investment, labor hours in both consumption and investment sectors, and investment's relative price. The model incorporates various stochastic processes, including disturbances to long-run and stationary technology, investment-specific technology, sectoral wage markups, shopping effort, and the discount factor.

We first estimate a simplified version of the model as a proof of concept. Incorporating capacity utilization data reveals that goods market frictions and demand shocks play a more significant role than indicated by an estimation which only uses conventional macroeconomic variables. In our general setting, we estimate high and precise values of the matching elasticity and find that shocks to shopping effort account for the majority of the forecast error variance in output, the Solow residual, and utilization. Furthermore, search demand shocks and sector-specific wage markup shocks prove essential for inducing positive comovement of utilization data and fitting sectoral data overall. Our parameter identification analysis validates the model's robustness: key parameters estimated using artificial data cluster consistently around their true values.

Publication

Unemployment and Labor Productivity Comovement: The Role of Firm Exit

Joint with Miroslav Gabrovski — Journal of Economic Dynamics and Control, 2025

This article addresses a significant limitation of the Diamond–Mortensen–Pissarides model: its prediction of an almost perfect relationship between unemployment and labor productivity, which contradicts empirical evidence showing only a mild correlation. We resolve this discrepancy by extending the model to incorporate sunk entry costs and finitely elastic vacancy creation, and by carefully distinguishing job loss arising from destruction of a business opportunity from match separation. These features render vacancies a partially predetermined, positively valued stock variable. If the destruction rate is low, most vacancies are inherited from the past and reflect historical rather than current productivity, which breaks the tight unemployment–productivity link.

When calibrated to information on job turnover and recall rates, the model reproduces the empirical contemporaneous and dynamic correlations between labor market variables and productivity while preserving the strong correlation between unemployment, vacancies, and market tightness observed in the data.

Working Paper

Role of Endogenous Business Formation and Exit for Unemployment and Vacancy Dynamics

Joint with Zhesheng Qiu and Marshall Urias

This project extends the prior work by generalizing Bilbiie et al. (2012)'s model of endogenous product creation with heterogeneous producers in the spirit of Melitz (2003), studying the implications for labor market dynamics. Monopolistically competitive producers use labor and face exit risk from product obsolescence and idiosyncratic productivity shocks. The creation of both businesses and vacancies requires sunk costs, making them partially predetermined: if a product line survives, unfilled vacancies are reposted. We estimate the model via Bayesian simulated method of moments using aggregate technology, product destruction, and match separation shocks.

Firm exit immediately eliminates jobs and posted vacancies and also reduces product variety, so vacancy persistence closely tracks product-line longevity. In contrast, match separation shocks destroy only filled jobs and leave product lines intact, implying that only destruction shocks generate a Beveridge-curve comovement. The loss of variety also dampens job creation and employment via an aggregate demand externality. Adverse technology shocks prune product lines below a profitability cutoff, amplifying labor-market effects. Initial results indicate that the model matches the volatility, autocorrelation, and cross-correlation of unemployment, vacancies, business formation, employment-to-unemployment transitions, and establishment exit, with technology and destruction shocks playing the predominant roles.

Publication

Corporate Finance, Monetary Policy, and Aggregate Demand

Journal of Economic Dynamics and Control, 2019

This paper studies how heterogeneity of financial frictions and monopolistic competition influence the pass-through of the nominal interest rate to the real lending rate, its transmission into investment, and its effect on corporate cash holdings. Firms finance stochastic investment opportunities using bank-issued credit or money. The empirical motivation is strong evidence that the effects of monetary policy differ markedly by industry and are influenced by firms' financial constraints. I explore heterogeneity in the pledgeability of assets following Kiyotaki and Moore (1997), where heterogeneous financial frictions are particularly important in the presence of demand linkages from monopolistic competition.

The model implies that financially constrained firms hold more cash, and that for such firms, cash holdings rise with competition. I verify both implications on Compustat data from 1964–2017, measuring competition using both the sales-to-cost margin and markup estimates based on the production approach (De Loecker et al., 2020). I also find that financial constraints raise firms' sensitivity to monetary policy, that the aggregate demand externality from monopolistic competition raises transmission and interacts with financial frictions, and that a mean-preserving spread of financial frictions reduces investment and output, strengthens transmission, and reduces the external share of finance.

Publication

Unsecured Credit, Product Variety, and Unemployment Dynamics

Macroeconomic Dynamics, 2020

This paper develops a theory of feedback between revolving credit and product development and examines its ability to explain labor market volatility. Revolving credit is the primary determinant of short-run household liquidity; credit limits vary substantially over the cycle and comove positively with product variety and negatively with unemployment. I extend the Mortensen–Pissarides model with an endogenous borrowing constraint and free entry of monopolistically competitive firms.

Higher debt limits encourage firm entry and raise product variety (the entry channel), and greater variety renders default more costly, thereby raising the equilibrium debt level (the consumption value channel). The model can reasonably fit historical time series on unemployment, vacancies, and revolving credit under both financial shocks and productivity shocks, and reproduces the rise in unemployment during the Great Recession. The fit is noticeably worse under productivity shocks alone, showcasing the importance of disturbances originating in financial markets.