Job Market Paper

  • Financial Crises, Debt Maturity, and Capital Controls [PDF]

    This paper studies debt portfolio choice and optimal capital control policy in an open economy with financial frictions. I construct a new measurement of capital control changes and document two novel patterns: in financial crises, (i) capital inflow controls are tightened, and (ii) short-term inflow is tightened more than the long-term. Motivated by these findings, I build a model of international borrowing with collateral constraint and multiple debt maturities. The key insight is that, due to pecuniary externality, private agents undervalue the cost of financial liability that demands repayment in future constrained states, inducing overborrowing regardless of maturity. More importantly, overborrowing in short-term debt is especially severe because private agents undervalue the insurance benefit of long-term debt for future constrained states. To counteract these inefficiencies, the model justifies a set of state-contingent and maturity-dependent capital controls. When calibrated to Argentine data, the model reproduces the dynamics in debt portfolio, and the cyclicality and short-term targeting in the optimal capital control policy. Quantitatively, the optimal policy significantly improves welfare by reducing crisis frequency by half and generating a welfare increase equivalent to 0.59% rise in consumption.

Working Papers

  1. Real Exchange Rate and External Balance: How Important are Price Deflators?

    [PDF | IMF WP| slides] (with JaeBin Ahn, Rui Mano)

    Among real exchange rates deflated by various prices (CPI-, GDP deflator-, Unit Labor Cost-), only unit-labor-cost-based one shows significant negative correlation with external balance, and it can be rationalized by price and wage rigidity and intermediate goods trade.

  2. Extensive Margin Adjustment of Multi-product Firms and Stock Returns

    [PDF| IMF WP| slides] (with Carlos Carvalho, Gee Hee Hong)

    Product turnover helps firm to cope with shocks, therefore, it is associated with lower risk premium and lower excess equity return.

Work in Progress

  1. Governance Quality and the Capital Structure of a Nation,  (with Shang-Jin Wei)
  2. Business Cycle Through the Lens of Product Turnover,  (with Carlos Carvalho, Gee Hee Hong)

Teaching (TA)

  • Financial Economics, Columbia University, [2017, 2016, 2014, 2013]
  • Money and Banking, Columbia University, [spring 2016]
  • Corporate Finance, Columbia University, [2014, 2015]
  • Globalization, Markets and the Changing Economic Landscape (EMBA), Columbia University, [summer 2014]
  • Advanced Macroeconomics, Peking University, [2012]
  • Mathematical Analysis, Wuhan University, [2007 - 2009]
Jing Zhou (Columbia University)