Research

This paper studies the drivers of the US real exchange rate (RER), with a particular focus on its comovement with net trade (NT) flows. We consider the entire spectrum of frequencies, as the low-frequency variation accounts for 61 and 64 percent of the unconditional variance of the RER and NT, respectively. We develop a generalization of the standard international business cycle model that successfully rationalizes the joint dynamics of the RER and NT while accounting for the major puzzles of the RER. We find that, while financial shocks are necessary to capture high frequency variation in RER, trade shocks are essential for the lower frequency fluctuations.

We study the reasons for the large, coincident increases in unbalanced international trade and overall trade from 1970 to 2019. We show that these two salient features--a rise in net and gross international trade--are largely a consequence of a reduction in intratemporal trade barriers rather than a substantial reduction in the frictions on intertemporal trade or greater asymmetries in business cycles. Beyond explaining changes in the distribution of gross and net trade, the decline in intratemporal trade frictions is consistent with a fall in the dispersion across countries in other key macro time series, including the real exchange rate, terms of trade, export-import ratio, relative spending, and relative GDP. 

Formerly circulated as "Rising Current Account Dispersion: Financial or Trade Integration?"

Using confidential U.S. Census data, we show that tariff pass-through to U.S. import prices during the U.S.–China trade dispute was incomplete within continuing trade relationships, even though it was complete in aggregate. We develop an empirical decomposition showing that complete aggregate pass-through reflects import reallocation toward higher-priced new relationships and importers. We then derive a welfare decomposition that applies to a broad class of heterogeneous-importer models. The formula identifies the key statistics needed to estimate the welfare effects of tariffs and shows how importer heterogeneity and sourcing adjustments matter. Quantitatively, ignoring these margins understates the welfare losses from tariffs. Our methods can be used to study other forms of pass-through and heterogeneous responses to common cost shocks.

This paper studies the dynamic impact of trade barriers, using regional variations in exposure to the U.S.-Korea Free Trade Agreement. A key contribution is the introduction of theoretically robust measures of trade barriers, which account for demand responses and incorporate multiple channels through which tariffs affect trade. I find the conventional measures understate the true extent of trade barriers.  Applying the new measure, I find that lower barriers to exporting lead to increases in GDP and employment, while greater competition with foreign firms has a delayed negative effect. Access to cheaper inputs has a negative impact, especially on employment.

Formerly circulated as "The Dynamic Impact of Trade Liberalization: Evidence from U.S.-Korea FTA"