Chenping Yang

Working Papers

Asymmetric Attention and State-Dependent Aggregate Demand and Supply (Job Market Paper)

Abstract

This paper studies how endogenous information acquisition by households and firms shapes state-dependent shock propagation. A new source of strategic interaction arises from the interdependence of information choices between households and firms. Theoretically, I show in a linear-quadratic-Gaussian framework that strategic motives in information acquisition depend not only on strategic motives in actions, but also on the volatility of underlying shocks. When applied to a standard macroeconomic model, two-sided information acquisition by households and firms generates non-monotonic movements in the slopes of aggregate demand and aggregate supply as volatility varies. Quantitatively, the model is consistent with the time variation in attention and the slopes of aggregate demand and aggregate supply in the U.S. economy, whereas predictions based on one-sided information acquisition contradict the data.

Equity Flows in Uncertain Times: the Role of Heterogeneous Information, with Alessandro D. Lavia and Francesco Beraldi 

Abstract

We study the role of information heterogeneity in determining equity flows during the global financial cycle. When global uncertainty increases, investors retrench toward their home country and the United States. We build a model of portfolio choice and information acquisition with varying learning costs across countries. Our model replicates the global financial cycle’s stylized facts and has new predictions for forecasters’ accuracy, which we test using micro forecast data. Domestic forecasters better predict their own country’s economic outcomes, especially with increased global uncertainty. However, the US is an exception, where domestic forecasters do not outperform foreign institutions.

Discretionary Monetary Policy with Survey Data (Draft coming soon)

Abstract

I study optimal discretionary monetary policy in a New Keynesian model under incomplete information. I show that the central bank can replicate the optimal allocation under full information by conditioning policy responses on households’ subjective inflation expectations. Failing to incorporate household subjective expectations affects welfare through two opposing mechanisms. First, it amplifies aggregate volatility in inflation and output by allowing household belief shocks to pass through. Second, it introduces a higher-order belief wedge among agents, which dampens aggregate fluctuations. Using a calibrated model, I find that the amplification effect dominates under empirically plausible parameter values, highlighting the importance of incorporating subjective survey data into monetary policy frameworks. 

Publications

Fiscal Incentives and Local Tax Competition, with Yongzheng Liu and Hang Tai

The World Economy 43.12 (2020): 3340-3356