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 measure of capital control changes and document two novel stylized facts during financial crises: (i) capital inflow controls are tightened, and (ii) short-term inflow controls are tightened more than long-term inflow controls. Motivated by these empirical findings, I extend the model of international borrowing with collateral constraint to allow for multiple debt maturities. As in the single-maturity version of the model, the equilibrium exhibits overborrowing because, due to a pecuniary externality, private agents undervalue the cost of financial liabilities that demand repayment in future constrained states. The key insight of the multiple-maturity model is that overborrowing in short-term debt is especially severe because the repayment of short-term liabilities is larger than that of long-term liabilities in future constrained states, resulting in greater cost undervaluation of short-term financial obligations. To counteract these inefficiencies, the model justifies a set of maturity-dependent capital controls. In line with the data, the model predicts a tightening of capital controls tilted toward short maturities during financial crises. When calibrated to Argentine data, the model reproduces the observed dynamics of debt portfolios, and the short-term targeting of capital controls during crises. The optimal capital-control policy reduces the frequency of crises by half and generates sizable welfare improvements.

Working Papers

  1. Quality of Public Governance and the Capital Structure of Nations and Firms

    [PDF | NBER WP] (with Shang-Jin Wei)

    Better institutional quality tends to promote a higher share of foreign direct investment and equity investment in total foreign liabilities, and a higher share of long-term debt within the debt/loan category.

  2. 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.

  3. 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. Capital Controls in Financial Crises: Inflow and Outflow
  2. Business Cycle Through the Lens of Product Turnover,  (with Carlos Carvalho, Gee Hee Hong)

Teaching (teaching assistant)

  • 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)