Academic publications
The Impact of Supply Chain Disruptions on Business Expectations during the Pandemic
(with Brent H. Meyer and Xuguang Simon Sheng).
Energy Economics, 126, 2023: 106951.
[Abstract]
Utilizing the Federal Reserve Bank of Atlanta’s Business Inflation Expectations (BIE) survey, which has been continuously collecting subjective probability distributions over own-firm future unit costs since October 2011, we document two facts about firms’ marginal cost expectations and risk during the COVID-19 pandemic. First, in the early months of the pandemic, firms, on net, saw COVID-19 largely as a demand shock and lowered their one-year ahead expectations. However, as the pandemic wore on, firms’ one-year ahead unit cost expectations rose sharply alongside their views on supply chain and operating capacity disruptions. Second, the balance of unit cost risks shifted sharply over the course of the pandemic and by the end of 2022, upside risks had sharply outweighed perceived downside risks over the year ahead. We find that both positive demand shocks (e.g. large order backlogs) and negative supply shocks (e.g. long supplier delivery times and labor shortages) have contributed to elevated short-term unit cost expectations and risk. Specifically, supply shocks accounted for roughly 40% of the increase in manufacturers’ and nearly one-third of service-providers’ unit cost expectations.
Cash Payments and the Penny Policy Debate
(with Oz Shy).
Journal of Economic Behavior and Organization, 208, 2023: 80–94.
[Abstract] • [Code]
This article constructs a model of optimal consumer-merchant exchange of cash payments. We use consumer payment choice diary data to quantify the burden of exchanging currency notes and coins. The model is then applied to analyze a policy debate whether to eliminate the penny coin from circulation. We find that penny elimination would reduce the burden of exchanging cash but will not have any significant inflationary consequences caused by price rounding. Surprisingly, a removal of both the penny and nickel coins from circulation would slightly increase (not decrease) the burden relative to penny elimination only.
How People Pay Each Other: Data, Theory, and Calibrations
(with Claire Greene and Oz Shy).
Journal of Behavioral and Experimental Economics, 96, 2022: 101788.
[Abstract] • [Code]
Using a representative sample of the U.S. adult population, we analyze which payment methods consumers use to pay other consumers (p2p) and how these choices depend on transaction and demographic characteristics. We construct a random matching model of consumers with diverse preferences over the use of payment methods for p2p payments. The model is calibrated to the share of p2p payments made with cash, checks, and electronic technologies from 2015 to 2019. We find about two-thirds of consumers have a first p2p payment preference for cash. One-third rank checks first. Approximately 94 percent of consumers rank electronic technologies second.
The Impact of the COVID-19 Pandemic on Business Expectations
(with Brent H. Meyer and Xuguang Simon Sheng).
International Journal of Forecasting, 38(2), 2022: 529–544.
[Abstract]
We document and evaluate how businesses are reacting to the COVID-19 crisis through August 2020. First, on net, firms see the shock (thus far) largely as a demand rather than supply shock. A greater share of firms report significant or severe disruptions to sales activity than to supply chains. We compare these measures of disruption to their expected changes in selling prices and find that, even for firms that report supply chain disruptions, they expect to lower near-term selling prices on average. We also show that firms are engaging in wage cuts and expect to trim wages further before the end of 2020. These cuts stem from firms that have been disproportionally negatively impacted by the pandemic. Second, firms (like professional forecasters) have responded to the COVID-19 pandemic by lowering their one-year-ahead inflation expectations. These responses stand in stark contrast to that of household inflation expectations (as measured by the University of Michigan or the New York Fed). Indeed, firms’ one-year-ahead inflation expectations fell precipitously (to a series low) following the onset of the pandemic, while household measures of inflation expectations jumped markedly. Third, despite the dramatic decline in firms’ near-term inflation expectations, their longer-run inflation expectations have remained relatively stable.
