RESEARCH

Publications

Previously circulated under the title, “The Effect of Oil Price Uncertainty on the Macroeconomy.”

Working Papers

  • What Can We Learn about Carbon-Reducing Innovations from the Joint Dynamics of CO2 Emissions and GDP?, with Lilia Karnizova, submitted.
    • Technological innovations designed to save energy, advance carbon storage or foster clean energy are often highlighted as a solution to mitigate emissions without reducing economic growth. However, theoretical studies disagree about the feasibility of such a solution, and empirical evaluations at the aggregate level are scarce. This paper provides new evidence on the macroeconomic effects of carbon-reducing technological innovations. We explore the joint dynamics of U.S. per capita emissions and GDP and uncover a shock that reduces emissions without lowering output by construction. After extensively examining its impacts on macroeconomic and environmental indicators, we interpret this novel shock as representing energy-efficiency changes in U.S. homes. We do not find compelling evidence that other carbon-reducing innovations were historically successful in lowering emissions without hindering economic growth in our sample. Implications of our findings are instructive for academics and policy-makers interested in climate change policies.
    • [On-line Appendix]
    • Previously circulated under the title, “Energy Efficiency and Fluctuations in CO2 Emissions.”
  • United States of Mind under Uncertainty, with Siye Bae and Myunkyu Shim, revision requested at the Journal of Economic Behavior and Organization.
    • This paper investigates if heightened economic uncertainty raises concerns about mental health in the U.S. We first quantify such concerns by constructing a composite index, i.e., the Mental Health Concerns Index, using changes in the intensity of Google search queries related to mental disorders and distress. This index i) rises significantly during the three recessionary episodes and ii) comoves negatively with survey responses that reflect views on current consumer sentiment or on future economic conditions. We find that the concerns regarding mental health substantially increase after an unexpected hike in economic uncertainty; uncertainty not only channels through its negative impacts on economic activity, but also directly affects the level of concerns. Our findings suggest that an uncertainty shock can have a far-reaching impact on overall welfare of economic agents by leaving them more concerned about mental health.
  • Pass-through of Oil Prices: Supply Shocks Strike at the Core, with Sangheon Ahn, submitted.
    • This paper investigates how structural oil market shocks pass-through to the U.S core prices. Separating out the sources of oil price increases reveals that supply shocks significantly and persistently pass-through to core prices, while demand-driven oil price changes do not. Examining different sample periods over time, we find that the pass-through of the supply shocks have become increasingly intense and persistent, especially since the outbreak of Covid-19. Changes in the response patterns of inflation expectations as well as capital equipment producer price to the oil shocks likely have contributed to the strengthening of the supply shock pass-through. Our findings highlight that understanding the sources of oil price changes is crucial for gauging their impacts on core prices and furthermore, for the conduct of monetary policy. 
  • Are Oil Price Shocks a Boon to the Korean Economy?, with Sangheon Ahn and Myungkyu Shim, submitted.
    • Yes, as long as the shock is driven by higher global economic activity that generates greater demand for trade. Other structural oil shocks also yield non-negative responses at the aggregate level. The common perception that oil shocks deter the Korean economy which depends heavily on imported energy sources is empirically supported only when sectoral differences in addition to the structural sources of the oil shocks are accounted for. These findings highlight the importance of considering heterogeneity along these dimensions to better understand the oil-macro relation for small open economies.
  • Does Economic Policy Uncertainty Differ from Other Uncertainty Measures? Replication of Baker, Bloom, and Davis (2016), with Siye Bae and Myunkyu Shim, submitted.
    • This paper revisits Baker et al. (2016)’s main finding that shows the significant negative impacts of shocks to Economic Policy Uncertainty index on the U.S. aggregate economic activity. We focus on sub-sample analyses with sample periods extended to November 2022. We find that shocks to the index does not significantly affect the economy once we separate the period from September 2008 to December 2019, in contrast to significant negative impacts found in the sample ending earlier. Interestingly, this feature is specific to the policy uncertainty, while other popular uncertainty measures retain downward pressures on the economy across across all of the sub-sample periods examined. The policy uncertainty again deter economic activity once the Covid-19 period is included in the sample, implying that the size of shocks and/or the state of the economy may play an additional role for its transmission.
  • Let’s Get Physical: Impacts of Climate Change Physical Risks on Local Employment, with Thibaut Duprey and Genevieve Vallee.
    • We quantify the distributional impacts of climate change physical risks on employment, using shocks derived from narrative evidences of monthly natural disasters collected across 10 Canadian provinces over 40 years. We use a novel panel quantile local projection approach, which takes into account that natural disasters are tail events, localized in space and time, and hard to predicted in a given month-province. We find that the odds of a high provincial employment rate decreases on impact, but the effect tends to become positive as the economy recovers from a disaster. We also find substantial heterogeneity across different sectors, employment status and disaster types. (Draft available upon request)
  • Oil Price Uncertainty and Vehicle Purchase Decisions, with Aram Derdzyan.
    • Heightened uncertainty may cause consumers to recalculate optimal decisions, at the same time as stirring up searching activities to collect more information to resolve some of it. We use monthly micro-level vehicle sales data between 2005 and 2019 matched with fuel efficiency by make and model, and investigate how vehicle consumption is related to oil price uncertainty and consumers’ information seeking behavior on gasoline prices.  We find that vehicle sales decline significantly when oil price uncertainty rises. However, this decline in sales can be offset, as consumers’ are actively seeking more information on gasoline prices. 
  • Uncertainty and Labor Market Fluctuations, with Justin J. Lee. [Dallas Fed WP version]
    • We investigate how a macroeconomic uncertainty shock affects the labor market. We focus on the uncertainty transmission mechanism, for which we employ a set of worker flow indicators in addition to labor stock variables. We incorporate common labor factors from such indicators into a framework that can simultaneously estimate historical macroeconomic uncertainty and its impacts on the macroeconomy and labor market. We find firms defer hiring full-time workers as macroeconomic uncertainty intensifies the real options value of waiting, while switching to involuntary part-time workers that incur low adjustment costs. Moreover, significantly more workers are laid off and voluntary quits drop, suggesting that other mechanisms such as the aggregate demand channel also play a crucial role.

Other Publication & Working papers