I am a PhD candidate in the Department of Economics at Yale University.

I will be available for interviews at the 2020 ASSA Annual Meeting in San Diego and at the 2020 EEA Meeting in Rotterdam.

Fields of Research: Macroeconomics, Monetary Economics

Please find my CV here


Contact: minghao.li@yale.edu

Job Market Paper

Countercyclical Dispersion of Price Changes: Causes and Implications

Abstract: This paper studies the nature of countercyclical price change dispersion and revisits the real effects of monetary policy over the business cycle. Using Nielsen Retail Scanner data, I show that the increase in the dispersion of price changes during the Great Recession is largely driven by the diverging price adjustment between goods of different qualities. Prices of low-quality goods drop dramatically, while those of high-quality goods remain stable. Conversely, the contribution of increasing volatility of individual prices is negligible. By linking Nielsen Consumer Panel with Retail Scanner data, I find that households who purchase a larger fraction of low-quality goods during the recession become more price-sensitive, suggesting that sellers of low-quality goods face increasing demand elasticity. Motivated by the empirical findings, I develop a quantitative multi-sector menu cost model incorporating countercyclical elasticity of demand in the sector of low-quality goods. The model successfully replicates the countercyclical dispersion of price changes and the price change distribution of goods in different quality groups. In terms of the effectiveness of monetary policy, time-varying demand elasticity affects monetary non-neutrality mainly through the selection effect. Quantitatively, contrary to models driven by second-moment shocks, monetary policy is still very effective during recessions: the cumulative output response to a monetary policy shock is only 4% smaller in recessions.

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