UC San Diego

Chapter 1 studies the dynamic behavior of durable input inventories. The positive contemporaneous comovement between aggregate inventories and sales is a well-known stylized fact. I highlight an overlooked feature that for durable input inventories, which constitute a volatile component of the aggregate inventories, the inventory movements lag sales movements by around three quarters. This lagged comovement is discernible both in the unconditional cyclical components of data and in the impulse responses to identified aggregate shocks. I develop a tractable supply chain production problem that is capable of reproducing the lagged comovement. In this model, producers are required to order critical inputs from suppliers one quarter in advance and they occasionally adjust their optimal order sizes based on forecasts of their own future sales subject to information frictions. Fitting the model impulse responses with the empirical counterparts suggest the frictions need to be strong.

Chapter 2 studies the aggregate implications of the lagged inventory-sales comovement. I embed the production problem developed in Chapter 1 into a multisector New Keynesian framework featuring input-output relations between sectors and conventional real and nominal frictions. Following a monetary shock, relative to a counterfactual scenario in which the inventory-sales comovement is fully synchronized, the estimated model demonstrates dampened responses of aggregate output over the first year but more gradual recovery over later horizons due to the reduced sensitivity of user cost of capital with respect to real interest rate changes.

Chapter 3 studies the dynamic welfare implications following tariff shocks. We develop a tractable general equilibrium framework that features staggered sourcing decisions, nests the Eaton-Kortum model as the limiting long-run scenario, and accounts for the horizon-specific trade elasticity. We calibrate the model and use it to quantify the welfare impact of the 2018 US-China trade war. Model outcomes imply that applying the well-known static welfare formula on observed domestic trade shares miss important distortions. The short-run welfare impact can be smaller than the long-run impact for the US but larger for China despite the same low short-run trade elasticity. Third countries such as Mexico and Vietnam may experience welfare losses in the short run but welfare gains in the long term.