"Hospital Runs," with Wanyi Chen, 2020 Hospital runs are devastating when mild-symptom patients crowd out severe-symptom ones. This paper studies a rushing game among mild-symptom patients. We characterize the condition of runs. There exist self-fulfilling hospital runs because seeking care early grants patients the priority in receiving treatment when their condition deteriorates. Inefficient waiting can also happen as individuals ignore the social cost of future overload. With SIR dynamics, hospital runs could start long before the medical resources are insufficient for severe-symptom patients. Denying mild-symptom patients for treatment prevents the crowd-out but is worse than the optimal allocation when early treatment is effective enough.
“Money Allocation, Unemployment, and Monetary Policy,” with Min Zhang, 2020 Firms and consumers both hold significant amounts of money, and the firm money share changes over time and is negatively correlated with inflation. While existing studies of monetary policy and unemployment only consider consumer money, we build a framework of money allocation between consumers and firms. The results show that incorporating firm money greatly amplifies the effect of monetary policy on unemployment, and that an increase in inflation reduces the firm money share. The positive spillover effect from consumer money to firm money proves quantitatively important in accounting for changes in firm money.
"The Paradox of Search Effort and Rational Labor Stampedes," with Xiaodong Fan, 2019 Standard labor search and matching models feature procyclical search intensity and quick recoveries. Both predictions are at odds with the US labor market after the Great Recession. This paper shows that in an otherwise standard model that incorporates multi-market simultaneous search, a temporary financial crisis can raise both search intensity and unemployment persistently, like a stampede to an unemployment trap—workers search harder but end up discouraging job creation—even if only a fraction of workers can conduct simultaneous search. The observed productivity shocks reduce search effort and do not cause such hysteresis. Subsidizing entry costs can bring quick recovery.
"Financial Frictions, Liquidity Traps, and Monetary Policy," with Tiantian Dai, 2019 To better understand liquidity traps, we explicitly model open market operations and standing facilities. With financial frictions, the model is consistent with the observed liquidity traps, and the zero nominal interest rate is the worst steady-state policy. We characterize dynamic exit strategies and show novel implications on monetary policy in normal times. The central bank interventions not just swap currency for bonds but also interact with financial frictions and create differential effects on borrowers and lenders. A lower nominal rate implies higher total liquidity but more misallocation. Policies that ignore financial frictions can lead to liquidity traps endogenously over time.
