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Working Paper
Credit Search and Credit Cycles
Wen, Yi; Dong, Feng; Wang, Pengfei (2015-08-01)
The supply and demand of credit are not always well aligned and matched, as is reflected in the countercyclical excess reserve-to-deposit ratio and interest spread between the lending rate and the deposit rate. We develop a search-based theory of credit allocations to explain the cyclical fluctuations in both bank reserves and the interest spread. We show that search frictions in the credit market can not only naturally explain the countercyclical bank reserves and interest spread, but also generate endogenous business cycles driven primarily by the cyclical utilization rate of credit ...
Working Papers , Paper 2015-23

Journal Article
How to Jump-Start Industrialization in Sub-Saharan Africa
Wen, Yi; Arbogast, Iris (2021-05-27)
Most sub-Saharan nations are poor and a long way from full-scale industrialization. However, certain policies could help spur their economic development.
The Regional Economist

Journal Article
Reducing the U.S. deficit by recycling capital inflows
Wen, Yi (2012)
The United States can simply recycle the financial capital inflows from China and re-export them back to China in the form of FDI. In so doing, the United States gains a substantially larger rate of return from FDI than China does from owning U.S. government bonds.
Economic Synopses

Journal Article
Can rising housing prices explain China’s high household saving rate?
Wen, Yi; Wang, Xin (2011-03)
China?s average household saving rate is one of the highest in the world. One popular view attributes the high saving rate to fast-rising housing prices and other living costs in China. This article uses simple economic logic to show that rising housing prices and living costs per se cannot explain China?s high household saving rate. Although borrowing constraints and demographic changes can help translate housing prices to the aggregate saving rate, quantitative simulations using Chinese data on household income, housing prices, and demographics indicate that rising mortgage costs contribute ...
Review , Volume 93 , Issue Mar , Pages 67-88

Working Paper
The Determination of Public Debt under both Aggregate and Idiosyncratic Uncertainty
Chien, YiLi; Wen, Yi (2022-04-28)
We use an analytically tractable, heterogeneous-agent incomplete-markets model to show that the Ramsey planner's decision to finance stochastic public expenditures implies a departure from tax smoothing and an endogenous mean-reverting force to support positive debt growth despite the government's precautionary saving motives. Specifically, the government's attempt to balance the competing incentives between its own precautionary saving (tax smoothing) and households' precautionary saving (individual consumption smoothing)---even at the cost of extra tax distortion---implies an endogenous, ...
Working Papers , Paper 2019-038

Working Paper
QE: when and how should the Fed exit?
Wen, Yi (2014-07-21)
The essence of Quantitative Easing (QE) is to reduce the costs of private borrowing through large-scale purchases of privately issue debts, instead of public debts (Ben Bernanke, 2009). Notwithstanding the effectiveness of this highly unconventional monetary policy in reviving private investment and the economy, it is time to think about the likely impacts of the unwinding of QE (or the reversed private-asset purchases) on the economy. In a standard economic model, if monetary injections can increase aggregate output and employment, then the reversed action will likely undo such effects. ...
Working Papers , Paper 2014-16

Journal Article
The U.S. consumption boom and trade deficit
Shimek, Luke M.; Wen, Yi (2007-10)
National Economic Trends , Issue Oct

Working Paper
Time-Inconsistent Optimal Quantity of Debt
Chien, YiLi; Wen, Yi (2021-04-06)
A key property of the Aiyagari-type heterogeneous-agent models is that the equilibrium interest rate of public debt lies below the time discount rate. This fundamental property, however, implies that the Ramsey planner's fiscal policy may be time-inconsistent because the forward-looking planner would have a dominate incentive to issue plenty of debt, such that all households are fully self-insured against idiosyncratic risk whenever the interest rate of government borrowing is lower than the household time discount rate. But such a full self-insurance allocation may be paradoxical because, to ...
Working Papers , Paper 2020-037

Working Paper
Housing prices and the high Chinese saving rate puzzle
Wen, Yi; Wang, Xin (2012)
China?s over 25% aggregate household saving rate is one of the highest in the world. One popular view attributes the high saving rate to fast-rising housing prices in China. However, cross-sectional data do not show a significant relationship between housing prices and household saving rates. This article uses a simple consumption-saving model to explain why rising housing prices per se cannot explain China?s high household saving rate. Although borrowing constraints and demographic changes can translate housing prices to the aggregate saving rate, quantitative simulations of our model using ...
Working Papers , Paper 2012-038

Working Paper
A Search-Based Neoclassical Model of Capital Reallocation
Wen, Yi; Dong, Feng; Wang, Pengfei (2018-08-01)
As a form of investment, the importance of capital reallocation between firms has been increasing over time, with the purchase of used capital accounting for 25% to 40% of firms total investment nowadays. Cross- firm reallocation of used capital also exhibits intriguing business-cycle properties, such as (i) the illiquidity of used capital is countercyclical (or the quantity of used capital reallocation across rms is procyclical), (ii) the prices of used capital are procyclical and more so than those of new capital goods, and (iii) the dispersion of firms' TFP or MPK (or the bene t of capital ...
Working Papers , Paper 2018-17

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