Choongryul Yang

I received my Ph.D. in economics from the University of Texas at Austin in 2020 and will be joining the Federal Reserve Board as an Economist.

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

For more information please see my CV or contact me at: cryang1224@gmail.com

Working Papers

Winner of the 2020 Society for Computational Economics Student Prize

This version: 2019/11. [Draft].

How does the number of products sold by a firm affect its decisions regarding price setting and information acquisition? Using a firm-level survey from New Zealand, I show that firms that produce more goods have both better information about aggregate inflation and more frequent but smaller price changes. To characterize the implications of these empirical findings for the ability of monetary policy to stimulate the economy, I develop a new dynamic general equilibrium model with rationally inattentive multi-product firms that pay a menu cost to reset their prices. I show that the interaction of the menu cost and rational inattention frictions leads firms to adopt a wait-and-see policy and gives rise to a new selection effect: firms have time-varying inaction bands widened by their subjective uncertainty about the economy such that price adjusters choose to be better informed than non-adjusters. This selection effect endogenously generates a distribution of desired price changes with a majority near zero and some very far from zero, which acts as a strong force to amplify monetary non-neutrality. I calibrate the model to be consistent with the micro-evidence on both prices and inattention and find two main quantitative results. First, the new selection effect, coupled with imperfect information of price setters, leads to real effects of monetary policy shocks in the one-good version of the model that are nearly as large as those in the Calvo model. Second, in the two-good version of the model, as firms optimally choose to have better information about monetary shocks, the real effects of monetary policy shocks decline by 20%.

Joint work with Hassan Afrouzi

--- Documentation

--- Julia Package for Solving Dynamic Rational Inattention Problems (DRIPs)

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

This version: 2020/07. [Draft].

We develop a tractable method for solving Dynamic Rational Inattention Problems (DRIPs) in LQG settings and propose an attention driven theory of the Phillips curve as an application of our general framework. We show that within a general equilibrium flexible price model with dynamic rational inattention, the slope of the Phillips curve 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 find it optimal to pay less attention to monetary policy shocks. Therefore, when monetary policy is more hawkish, the Phillips curve is flatter and inflation expectations are more anchored. In a quantitative exercise, we calibrate our general equilibrium model with TFP and monetary policy shocks to post-Volcker U.S. data and find that (1) our model can match the higher volatility of inflation and GDP in pre-Volcker era as non-targeted moments, and (2) our mechanism quantifies a 75% decline in the slope of the Phillips curve in the post-Volcker period.

Joint work with Saroj Bhattarai and Felipe Schwartzman

[FRB Richmond Working Paper 19-07]

This version: 2020/05. [Draft].

We show that the 2006-09 US housing crisis had scarring local effects. For a given county, a 10% reduction in housing wealth from 2006 through 2009 led to a 3.3% decline in employment by 2018, and a commensurate decline in value added. This persistent effect occurred despite the shock having no significant impact on labor productivity and only a short-lived impact on household demand, house prices, and household leverage. We find that the local labor market adjustment to the housing shock was particularly costly: local wages did not respond, and longrun convergence in the local labor market slack instead took place entirely through population losses in affected regions. These results on population adjustment leading to mean-reversion in local slack extend the seminal observations by Blanchard and Katz (1992) to the effects of a temporary and identified local demand shock. Additionally, we show that the housing bust, compared with the housing boom, had asymmetric effects on employment and wages, indicating a role for downward wage rigidity.

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

[FRB Dallas Global Institute WP 391], [CESifo Working Paper No. 7630]

This version: 2020/05. [Draft].

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