Research
Working Papers
1. LSAP Shocks and Stock Prices: The Information Effect Revisited (with John Rogers, Wenbin Wu, and Juanyi Jenny Xu)
Summary
| The central bank information effect is the subject of lively debate. We present a novel finding regarding the effects of U.S. large-scale asset purchase (LSAP) shocks and offer interpretations based on an information effect that varies both over time and across firms. Specifically, positive LSAP shocks depress U.S. stock returns during periods of quantitative easing (QE) but not in other sub-periods. An LSAP easing policy signals a worsening in the Fed's economic outlook, leading to a decrease in equity investors' confidence. This ``LSAP information effect" is more pronounced for more procyclical firms and is state-dependent, with larger effects during worse economic circumstances. The transmission of this LSAP shock information effect works primarily through the risk premium channel, with more significant effects on firms with higher risk exposure. |
Presentation
| Fudan Brown Bag (2023), PKU-NUS Annual International Conference (2023), AMES, Singapore (2023), WEAI, San Diego (2023), AMES, Hangzhou (canceled), the HKUST Research Postgraduate Student Workshop (2024), IAAE, Xiamen (2024), AsianFA Annual Conference, Macau (2024), AMES, Vietnam (2024), 8th CCER Summer Institute, Beijing (2024) |
2. The Spill-back and Spillover Effects of US Monetary Policy: Evidence from Chinese Export Prices (with Yao Amber Li, Lingfei Lu, and Shangjin Wei)
Summary
| We find that an unanticipated tightening of US monetary policy tends to raise US import prices. This ``spill-back" pattern differs from typical open-economy macro models in which a demand effect or an exchange rate effect dominates. We also document a new ``spillover" effect: import prices of other countries also rise following an unexpected US monetary tightening. To understand the mechanism, we examine Chinese exporters and identify a borrowing cost channel - their liquidity conditions generally deteriorate after a US monetary tightening. Indeed, the output price response is greater for firms facing higher borrowing costs or tighter liquidity conditions. |
Presentation
| HKIMR-ECB-BOFIT Joint Conference on "Europe, Asia and the Changing Global Economy", the NBER Chinese Economy Working Group Meeting, the 2024 China International Conference in Finance, the 14th Annual Meeting of China Trade Research Group, the NBER East Asian Seminar on Economics 2024, the 1st HKUST-Fudan-SMU Conference on International Economics, the 6th Melbourne Annual Macro Policy Meeting, International Association for Applied Econometrics Annual Conference 2024, Asian Finance Association Annual Conference 2024, Asian Meeting of the Econometric Society in China 2024, the 1st International Economics Joint Conference in Shenzhen, the 15th Empirical Investigations in Trade and Investment Conference, the 17th Australasian Trade Workshop, and the seminar at Monash, PKU(NSD), China Agricultural University, NUFE, and HKUST. |
3. The International Spillover of Monetary Policy Shock: New Evidence from Nighttime Light (with Kaiji Chen, Qichao Wang, and Juanyi Jenny Xu)
Summary
| We revisit the international spillover effects of the US monetary policy shock (MPS) using a new data source, the daily nighttime light (NTL), as a high-frequency proxy for real economic activities. We find that the unexpected US tightening has a negative impact on China's output, and the peak comes about two months after the shock. The overall negative response is consistent with a construction investment channel, with the NTL variation mainly driven by non-built-up areas instead of city centers and suburbs. Consistently, cities with lower urbanization rates, and tighter financial conditions respond more negatively to a contractionary shock. Moreover, we show that trade exposure could partially mitigate the overall adverse impacts of a US tightening. |
Presentation
| HKUST Center of Economic Policy Seminar (2024), European Econometric Society Winter Meeting (2024), Spain, The International Finance and Banking Society IFABS (2024), Shanghai, The 11th International Conference on The Chinese Economy: Past, Present and Future, Suzhou, The 4th National Macroeconomics PhD student academic forum, Xiamen, The 14th Annual Meeting of China Trade Research Group cum International Conference on US-China Trade Disputes and Rearchitecture in Globalization, Hong Kong. |
Working in progress
1. Monetary Transmission and International Price in a Patman Zone: a Cost Channel
Summary
| Recent literature provides rich evidence on the financing cost channel of US monetary policy, which implies that a tightening policy is inflationary. This should be important for our understanding of how the Federal Reserve policy, as a main driver of the global financial cycle, would affect the inflation and output at home and abroad in an international context, especially under a pervasive flat Phillip curve. In light of this, I embed this channel into a two-country open-economy New Keynesian model to study the transmission of US monetary policy. It is found that this supply-side cost mechanism will lead to inflation pressure at home and abroad. The home and foreign output will also be disproportionately affected by the change in terms of trade. Moreover, the spillover and spillback effects of US monetary policy are determined by the foreign country's monetary policy stance. Finally, I also explore the optimal domestic policy and international coordination under this context. |
Presentation
| HKUST Research Postgraduate Students Workshop (2025) |
