Research & Discussions

Abstract: This paper studies the interplay between the liquidity position of displaced workers and the choice of their next sector of employment, and its implication for economic fluctuations driven by sectoral shocks. I develop a heterogenous-agent framework featuring multiple sectors, frictional labor markets and costly labor reallocation. Changing sectors results in short-term productivity losses while exiting unemployment faster. More liquidity enables displaced workers to reallocate across sectors while smoothing out earnings losses. I document empirical evidence in support of this channel using administrative data from Washington state and exploiting a regression kink design. Displaced workers with more liquidity are more likely to switch industries upon re-employment. Industry switchers experience 10 percentage points lower immediate earnings compared to industry stayers, but the gap closes within 8 quarters. Calibrated to my data, the model predicts that more generous unemployment insurance fosters more labor reallocation. When shocks affect sectors unevenly, this leads to less severe recessions.

Abstract: This paper investigates how Global Value Chains (GVCs) shape inflation dynamics and whether the source country of imported inputs matters. We develop a two-country model with input-output linkages and show that greater reliance on imported intermediate goods---our measure of GVC integration---affects inflation dynamics through two mechanisms: a direct cost channel, which flattens the Phillips curve by reducing the sensitivity of marginal costs to domestic conditions, and a cyclical channel, in which terms-of-trade movements transmit international relative-price fluctuations into domestic production costs. We test these predictions using UK industry-level data for 2000–2014 and find that industries with higher foreign-input shares exhibit a weaker relationship between inflation and the output gap. Crucially, this pattern is driven by inputs sourced from Emerging Market Economies (EMEs), not from advanced economies. To interpret this source asymmetry, we extend our model to a dynamic, multi-sector New Keynesian model with input–output linkages. Tariff-induced de-integration shocks generate similar aggregate responses but markedly different sectoral dynamics: sectors that rely heavily on foreign intermediates experience temporary expansions driven by strong substitution toward domestic inputs, while less open sectors exhibit broad output declines. These results show that the composition of GVCs---across both source countries and sectors---is central for understanding inflation dynamics in advanced economies.

Abstract: This article documents five facts regarding the micro-level patterns of international remittance flows. We leverage new administrative data from a large global money transfer operator (MTO). First, we find that remittance senders use their local currency as the reference currency as opposed to the recipient's local currency. Second, we find that an individual sender's remittance amount doesn't change frequently. Therefore, remittance flows are sticky in the sender's currency. Third, we find that on average, a given sender has multiple recipients, which tend to be located in one country. Fourth, we find that the recipient's local currency is the most common receiving currency, but the U.S. dollar is a prominent receiving currency in some Emerging Markets. Fifth, we find that during the pandemic, there was an increase in the number of transfers and volume of remittance flows through the MTO and this was driven in equal parts by existing and new senders to the platform.