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Working Paper
On the Transition to Modern Growth
We study a simple model where a single good can be produced using a diminishing-returns technology (Malthus) and a constant-returns technology (Solow). The economy's output exhibits three stages: (i) stagnation; (ii) transition with increasing growth; (iii) constant growth in the long run. We map the Malthus technology to agriculture and show that the share of employment in agriculture is sufficient to determine both the onset of economic transition and the dynamics of output during the transition. Using 20th century data on agricultural share of employment, we project backward and estimate ...
Working Paper
The great housing boom of China
China?s housing prices have been growing nearly twice as fast as national income over the past decade, despite a high vacancy rate and a high rate of return to capital. This paper interprets China?s housing boom as a rational bubble emerging naturally from its economic transition. The bubble arises because high capital returns driven by resource reallocation are not sustainable in the long run. Rational expectations of a strong future demand for alternative stores of value can thus induce currently productive agents to speculate in the housing market. Our model can quantitatively account for ...
Working Paper
The great housing boom of China
China's housing prices have been growing nearly twice as fast as national income in the past decade despite (1) a phenomenal rate of return to capital and (2) an alarmingly high vacancy rate. This paper interprets such a prolonged paradoxical housing boom as a rational bubble that emerges naturally from China's large-scale economic transition, featuring an exceptionally high rate of return to capital driven by massive resource reallocation. Because such primarily resource-reallocation-driven high capital returns are not sustainable in the long run, expectations of high future demand for ...
Journal Article
Climate Risk and the Fed: Preparing for an Uncertain Certainty
While the severity and scope of a changing climate remains unclear, the consensus is that it poses a significant risk to the global economy and financial system. As monetary policymakers, the Fed’s job is to navigate this uncertainty by anticipating the potential changes and understanding their implications.
Working Paper
On the Transition to Modern Growth
We study a simple model where a single good can be produced using a diminishing-returns technology (Malthus) and a constant-returns technology (Solow). The economy's output exhibits three stages: (i) stagnation, (ii) transition with increasing growth, and (iii) constant growth in the long run. We map the Malthus technology to agriculture and show that the share of agricultural employment is sufficient to determine the onset of economic transition. Using data on the share, we estimate the onset of transition for the U.S. and Western Europe without using output data. Our model implies that ...