Comments on Ma and Zhang (2025).
Comments on Ma and Zhang (2025).
Monetary policy transmission in the benchmark New Keynesian (NK) model hinges on the Full Information Rational Expectations (FIRE) assumption, especially via indirect general equilibrium (GE) effects. This paper relaxes FIRE by introducing noisy information into a Heterogeneous-Agent NK model with financial frictions. Noisy information dampens amplification by muting GE effects, aligning model dynamics with empirical evidence, and resolving the forward guidance puzzle. It also broadens the determinacy region for policy rules. Finally, I explore belief shocks, showing that transitory “animal spirits” can have persistent effects, offering new insights into the macroeconomic consequences of information frictions.
This paper describes a novel method for combining revealed preference analysis in the tradition of Afriat (1967, International Economic Review, 8: 76–77) with a statistical demand model. The approach is illustrated with an analysis of the labor supply of the nonneoclassical taxi drivers described in Farber (2005, Journal of Political Economy, 113, no. 1: 46–82; 2008, American Economic Review, 98, no. 2: 1069–1082) and Crawford and Meng (2011, American Economic Review, 101: 1912–1932).
Using comprehensive patent data, we document: (1) multinational affiliates and their foreign parent firms comprise a significant portion of patents filed in China; and (2) there are subsequent transfers and spillovers of these technologies to domestic firms. Guided by this evidence, we develop a model of multinational production featuring cross-country idea flows, transfers, and spillovers. Quantitatively, we find that without multinational production and knowledge spillovers, the idea stock owned by China would drop by 30%. Furthermore, due to the externalities of multinationals through technology transfers and spillovers, subsidizing multinationals will at most increase real income by 8% in China.
We study optimal debt ceilings in a political-agency model with uncertainty about both policymaker type (benevolent or selfish) and economic state (good or bad). Elections generate disciplining and selection effects that differ across pooling, hybrid, and separating equilibria induced by different ceilings. The optimal ceiling trades off distorted intertemporal allocation under benevolent policymakers against excessive debt under selfish ones. Increased fiscal transparency appears ineffective under constant ceilings. State-contingent ceilings do improve welfare by adapting to economic conditions. Our results support differentiating budgetary restrictions in the reformed EU Stability and Growth Pact and underscore the role of independent fiscal institutions.
We highlight the role of economic materialism as a cultural phenomenon of significance in relation to economic transformation and development. By inducing material aspirations, an endogenous cultural change toward more widespread adherence to materialistic values is both a cause and an effect of productivity growth. This cultural–economic complementarity is a powerful mechanism of endogenous productivity growth; it also determines the prevalence of different cultural values vis-à-vis the prominence of material objectives. From a historical perspective, the model draws attention to a novel mechanism through which cultural change may have contributed to the take-off toward sustained economic growth.
This study shows that technological specialization is one plausible driver of long-term international capital flows. Capital scarcity raises marginal returns but also steers countries toward capital-saving technologies. As a result, capital-rich countries adopt capital-complementary technologies and keep importing capital from poorer countries that favor capital-substitute innovations. This divergence force on capital allocation, which we name the capital Matthew effect, offsets convergence from diminishing returns. The mechanism offers a unified explanation for puzzles like the Lucas paradox and global imbalances. Finally, we provide both country-level and firm-level evidence supporting this new model mechanism.
Although extractive industries have been associated with women's empowerment and lower infant mortality in Africa, this article provides evidence that the rapid increase in the demand for lithium-ion batteries reduced the education rates of children living in cobalt mining villages in sub-Saharan Africa. Children exposed to cobalt mining also exhibit slower cognitive and physical development than those living in noncobalt mining communities. The estimates are robust to spatial spillover effects and selective migration. This study highlights the need for policies that enforce child labor regulations in the cobalt mining sector, particularly because cobalt is crucial to technological development. Such policies can help mitigate the negative economic consequences for cobalt-rich communities in the long run.
We test the buffer stock model of savings behavior using a three-period intertemporal model. In one treatment, liquidity in the second period is constrained (borrowing not possible), while the unconstrained treatment has no such constraint. The buffer stock model predicts that a second-period liquidity constraint increases first-period savings. We also vary the variance of stochastic income (high or low) in a design. While we find no evidence for the predicted liquidity constraint effect, most other predictions hold, for example, income variance effects. Observed departures can be explained by some combination of debt aversion, cognitive heterogeneity, and/or learning.
We study competitive equilibria in exchange economies when a continuum of goods is conflated into a finite set of commodities. The design of conflation choices affects the allocation of scarce resources among agents, by constraining trading opportunities and shifting competitive pressures. We demonstrate the consequences on relative prices, trading positions, and welfare.
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