Ongoing Projects
Loss From Trade: Trends of Price Dispersion in Intermediate Good Market and Misallocation
Abstract: Substantial input price dispersion had been recently documented in several different contexts. I observe the same dispersion in Swedish import data, propose potential causes and document correlations between input price gap and economics outcome. I also find that the price dispersion has been increasing in recent years. One possible explanation for this is the decreasing trade cost. I build a quantitative model, featuring search-and-bargaining between buyers and supplier, to draw output implications of my empirical findings. In the baseline model, I find that the losses from misallocation increase with decreasing search cost.
Local and Unified Market
Inflation Persistence and a new Phillips Curve
with Marcus Hagedorn, Juan Llavador & Kurt Mitman
Abstract: Auclert et al. (2024) recently argued that, to first order, menu-costs models deliver the same New Keynesian Phillips Curves as time-dependent models in response to AR(1) shocks. We show here that when considering a broader class of shocks, menu-costs models can generate qualitatively and quantitatively different Phillips curves than implied by time-dependent models. Shocks to the growth rate of nominal demand generate inflation persistence in the model, in line with the data, but at odd with the standard time- dependent NKPC. Changes in the extensive margin of price adjustment in the menu-cost model generate history dependence that is captured by the lagged inflation rate. Once we control for lagged nominal demand growth, the explanatory power of lagged inflation drops significantly. The reason is that nominal demand growth is a second determinant of inflation in the Phillips curve in menu-cost models and inflation therefore inherits the persistence of the process for nominal demand.