Monetary Policy Transmission amid Demand Reallocations
International Journal of Central Banking, Accepted
The Pro-competitive Effects of Trade Agreements
Journal of International Economics, July 2024
Invoicing and the Dynamics of Pricing-to-Market:
Evidence from UK Export Prices around the Brexit Referendum
Journal of International Economics, March 2022
The Looming Threat of Tariff Hikes: Entry into Exporting under Trade Agreement Renegotiation
AEA: Papers and Proceedings, May 2020
Markups and Inflation in Oligopolistic Markets: Evidence from
Wholesale Price Data
How do market power and nominal price rigidity influence inflation dynamics? We formulate a tractable model of oligopolistic competition and sticky prices, and derive closed-form expressions for the pass-through of idiosyncratic and common cost shocks to firms' prices. Using unpublished micro data for Canadian wholesale firms, we estimate that idiosyncratic cost pass-through is incomplete and independent of the sector price stickiness, while common cost pass-through declines with price stickiness. The estimates imply a degree of strategic complementarity that lowers the slope of the New Keynesian Phillips curve by 30% in a one-sector model and by 64% in a multi-sector model.
Markets and Markups: Evidence on the Rising Market Power of Exporters from China
We develop an empirical framework that decomposes the export price elasticity to the exchange rate into contributions from markup and marginal cost elasticities. This framework embodies a new estimator of the markup elasticity that controls for marginal costs and endogenous market participation, and a new classification of products based on Chinese linguistics that helps refine the analysis of firms’ market power. Using Chinese customs data, we document a two- to three-fold increase in markup elasticities across product and firm types after 2005, indicating exporters from China acquired substantial market power in foreign markets.
Winner of the Emerald Best Paper Award at the 2018 China Finance Review International Conference
The Mutable Geography of Firms' International Trade: Evidence and Macroeconomic Implications
Using customs data from China (2000-2006) and the UK (2010-2016), this paper documents that international trade is characterized by a mutable geography – firms frequently adjust their set of export markets, even for established large exporters. To understand the underlying micro shocks that drive these market changes, this paper proposes new empirical measures and exploits the information on firms’ price and quantity changes in their continuing markets. I find consistent results in both China and the UK that most of these market changes are largely driven by demand-related shocks with a nontrivial proportion being correlated across markets. Introducing calibrated micro demand shocks into a multi-country general equilibrium model implies a
3.5% increase in welfare due to endogenous market participation.
Winner of the RoWE Young Economists Prize at the 2019 European Trade Study Group (ETSG) Annual Conference
The Swift Decline of the British Pound: Evidence from UK Trade-invoicing after the Brexit Vote
Using administrative transactions data from the United Kingdom, we document a swift decline in sterling use among British exporters after the 2016 Brexit vote. Through a novel decomposition, we document most of this decline comes from two sources: (i) continuously-operating firms switching from sterling to dollars or local currencies and (ii) reductions in trade volumes and transactions for sterling-loyal firms. We quantify the role of firm and market heterogeneity in driving these changes and document that firms which served markets with more US competitors and used more dollar-invoiced imported inputs were more likely to switch to dollars after the Brexit vote. Altogether, our findings provide the first quantitative evidence on the channels that contribute to changes in aggregate invoicing shares amidst political upheaval.
Dominant Currency Dynamics:
Evidence on Dollar-invoicing from UK Exporters
How do the choices of individual firms contribute to the dominance of a currency in global trade? Using export transactions data from the UK over 2010-2016, we document strong evidence of two mechanisms that promote the use of a dominant currency: (1) prior experience: the probability that a firm invoices its exports to a new market in a dominant currency is increasing in the number of years the firm has used the dominant currency in its existing markets; (2) strategic complementarity: a firm is more likely to invoice its exports in the currency chosen by the majority of its competitors in a foreign destination market in order to stabilize its residual demand in that market. We show that the introduction of a managerial fixed cost of currency management into a model of invoicing currency choice yields dynamic paths of currency choice that match our empirical findings.
Renegotiation of Trade Agreements and Firm Exporting Decisions: Evidence from the Impact of Brexit on UK Exports
The renegotiation of a trade agreement introduces uncertainty into the economic environment. We exploit the natural experiment of the Brexit referendum to estimate the impact of uncertainty associated with trade agreement renegotiation. Empirically, we develop measures of the trade policy uncertainty facing firms exporting from the UK to the EU after June 2016. Using the universe of UK export transactions at the firm and product level, we estimate entry (exit) in 2016 would have been 5.0% higher (6.1% lower) if firms exporting from the UK to the EU had not faced increased trade policy uncertainty after June 2016.
Media Coverage: VoxEU; The Economist (2018, 2019); The Financial Times; The Telegraph
Firm-level Pass Through: A Machine Learning Approach
Understanding how exporters react to exchange rate shocks is important for evaluating international shock transmissions and setting the optimal international monetary policy. Empirical studies have documented huge heterogeneity in the degree to which different firms and products respond to exchange rate shocks. In addition, estimates of exchange rate pass through (ERPT) are time varying and depend on observed and unobserved variables in a nonlinear way. This paper proposes a machine learning algorithm that systematically detects determinants of ERPT and estimates ERPT at the firm-level in a large-scale custom dataset. The accuracy of the algorithm is tested on simulated data from a multi-country version of Atkeson and Burstein (2008). Applying the algorithm to China’s custom data from 2000-2006, this paper estimates the ERPT of China’s exporters and documents new evidence on the nonlinear relationships among market structures, unit value volatility and ERPT.
Global Implications of Multilateral Competition and Pricing-to-Market
The Price Impacts of Trade Agreements
How is Brexit Affecting the Role of Sterling in UK Trade?
Pro-competitive Provisions in Deep Trade Agreements
Will ‘Level Playing Field’ Issues Derail the UK-EU Negotiations?
The Sterling Depreciation and UK Price Competitiveness
The Impact of Brexit Uncertainty on UK Exports
A Granular Analysis of the Exposure of UK Exports to EU Tariffs, Quotas and Antidumping under ‘No Deal’