Choongryul Yang

I am an Economist at the Federal Reserve Board of Governors.

My research focuses on macroeconomic topics, including monetary and fiscal policy, expectations formation, and business cycle fluctuations.

For more information please contact me at: or

Published Papers

Journal of Monetary Economics, May 2022, Vol. 128, 105–123. [Link]

Winner of the 2020 Society for Computational Economics Student Prize

, Local file: [Draft]

Using a New Zealand firm-level survey, I show that firms producing more goods have both better information about inflation and more frequent but smaller price changes. To explain these empirical findings, I develop a general equilibrium menu cost model with rationally inattentive multi-product firms. I show that the interaction of nominal and informational rigidities leads to a new selection effect: price adjusters are better informed than non-adjusters. This selection endogenously generates a leptokurtic distribution of desired price changes, which amplifies monetary non-neutrality. Compared to a one-product baseline, the real effects of monetary shocks are 12% smaller in a two-product model.

Joint work with Saroj Bhattarai and Felipe Schwartzman

Journal of Monetary Economics, April 2021, Vol. 119, 40–57. [Link]

, Other version: [FRB Richmond WP 19-07R]

The 2006-09 US housing crisis had scarring local effects. For a given county, a housing shock generating a 10% reduction in housing wealth from 2006 through 2009 led to a 4.4% decline in employment by 2018 and a commensurate decline in value added. This persistent local effect occurred despite the shock having no significant impact on labor productivity. The local labor market adjustment to the housing shock was particularly costly: local wages did not respond, and long-run convergence in the local labor market slack instead took place entirely through population losses in affected regions. Moreover, the 2002-06 housing boom does not generate significant employment gains, indicating that the employment losses relative to 2006 are also losses relative to the counterfactual case in which there was no housing cycle.

Working Papers

Joint work with Hie Joo Ahn and Shihan Xie

This version: 2022/05. [Draft]

We study the role of household heterogeneity in the effectiveness of monetary policy on households’ expectations with a particular focus on homeownership. Empirically, we find that homeowners lower their near-term inflation expectations in response to an increase in mortgage rates, while renters are less likely to do so. We further show that the monetary policy component of interest-rate rises drives the contractionary effect on homeowners’ expectations. This observation suggests that homeowners are attentive to news on interest rates and adjust their expectations accordingly in a manner consistent with the intended effect of monetary policy, though they may not have a direct understanding of monetary policy. We characterize these findings using a rational inattention model where homeowners making mortgage payments have an incentive to pay attention to news on interest rates, and hence, adjust their expectations in response to a monetary policy shock more than renters do.

Joint work with Saroj Bhattarai and Jae Won Lee

Revise and Resubmit at Quantitative Economics

This version: 2021/06. [Draft], [Online Appendix]

, Other versions: [FEDS 2021-13], [CAMA WP 107/2020], [CESifo WP No. 8779]

We show that the effectiveness of redistribution policy in stimulating the economy and improving welfare is directly tied to how much inflation it generates, which in turn hinges on monetary-fiscal adjustments that ultimately finance the transfers. We compare two distinct types of monetary-fiscal adjustments: In the monetary regime, the government eventually raises taxes to finance transfers while in the fiscal regime, inflation rises, effectively imposing inflation taxes on public debt holders. We show analytically in a simple model how the fiscal regime generates larger and more persistent inflation than the monetary regime. In a quantitative application, we use a two-sector, two-agent New Keynesian model, situate the model economy in a Covid-19 recession, and quantify the effects of the transfer components of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. We find that the transfer multipliers are significantly larger under the fiscal regime—which results in a milder contraction—than under the monetary regime, primarily because inflationary pressures of this regime counteract the deflationary forces during the recession. Moreover, redistribution produces a Pareto improvement under the fiscal regime.

Joint work with Hassan Afrouzi

This version: 2021/04. [Draft]

Evidence on firms’ expectations shows that while firms are on average uninformed about their economic environment, there is a significant amount of heterogeneity in the accuracy of their forecasts about aggregate variables and their subjective uncertainty about their own desired price changes. The natural question that follows is whose expectations matter for macroeconomic outcomes? Using data on firms’ expectations, we find there is selection in information acquisition: firms that have changed their price more recently tend to have more accurate forecasts and more certain posteriors. Comparing two models with different types of information acquisition costs, we find this evidence consistent with state-dependent information acquisition where firms only acquire information when making decisions and abstain from it otherwise. Deriving a sufficient statistic for monetary non-neutrality under state-dependent information acquisition, we find that only the most informed firms’ subjective uncertainty matter for the response of output to monetary shocks.

Joint work with Hassan Afrouzi

--- Documentation: [HTML], [PDF]

--- Packages for Solving Dynamic Rational Inattention Problems: [Julia], [Matlab]

--- An Interactive Set of Jupyter Notebooks in Julia Dynamic RI

This version: 2020/12. [Draft]

, Other version: [CESifo WP No. 8840]

We develop a fast, tractable, and robust method for solving the transition path of dynamic rational inattention problems in linear-quadratic-Gaussian settings. As an application of our general framework, we develop an attention-driven theory of dynamic pricing in which the Phillips curve slope is endogenous to systematic aspects of monetary policy. In our model, when the monetary authority is more committed to stabilizing nominal variables, rationally inattentive firms pay less attention to changes in their input costs, which leads to a flatter Phillips curve and more anchored inflation expectations. This effect, however, is not symmetric. A more dovish monetary policy flattens the Phillips curve in the short-run but generates a steeper Phillips curve in the long-run. In a calibrated version of our general equilibrium model, we find that our mechanism quantifies a 75% decline in the slope of the Phillips curve in the post-Volcker period, relative to the period before it.

Joint work with Saroj Bhattarai, Jae Won Lee, and Woong Yong Park

This version: 2022/05. [Draft]

, Other versions: [FEDS 2022-27], [FRB Dallas Global Institute WP 391], [CESifo WP No. 7630]

We study aggregate, distributional, and welfare effects of a permanent reduction in the capital tax rate in a dynamic equilibrium model with capital-skill complementarity. Such a tax reform leads to expansionary long-run aggregate effects but is coupled with an increase in the skill premium. Moreover, the expansionary long-run aggregate effects are smaller when distortionary labor or consumption tax rates have to increase to finance the capital tax rate cut. An extension to a model with heterogeneous households shows that consumption inequality increases in the long-run. We study transition dynamics and show that short-run effects depend critically on the monetary policy response: whether the central bank allows inflation to directly facilitate government debt stabilization and how inertially it raises interest rates. Finally, we contrast the long-term aggregate welfare gains with short-term losses and show that welfare gains for the skilled go together with welfare losses for the unskilled.

Work in Progress