My primary research interests lie in business cycle theory, political economy and growth.
Abstract:
This paper presents a model of price setting wherein firms partially inform their decisions by
watching price changes by other firms across an observation network. Within a context of
imperfect common knowledge and for a wide range of plausible and commonly observed network
structures, idiosyncratic shocks are shown to not "wash out" in aggregate prices. These
aggregate effects are also shown to be persistent despite the underlying idiosyncratic shocks
being entirely transitory. The model is therefore able to explain a variety of recently
documented stylised facts regarding price setting, including the observation that short-lived
price changes appear to contain macroeconomic content. The paper also presents a general,
readily implementable solution to Bayesian learning over an opaque social network, with the
effects of network learning on aggregate expectations able to be simulated without the need
to explicitly model the network.
JEL Classification: D21 (Firm Behavior), D83 (Search, Learning, and Information), E31 (Price Level; Inflation; Deflation)
Keywords: Network learning; Incomplete information; Inflation persistence; Aggregate volatility
Abstract:
This paper proposes a model that, focusing on the imperfect transfer of skill across
occupations, is able to explain trade or investment liberalisation-induced increases
in inequality independently of technological change or capital flows. It identifies
imbalances in skill across occupations as a potential source of rent-seeking
behaviour and predicts that when this occurs, firms may choose to employ highly
trained individuals to fill roles with both high and low education requirements.
Written as part of my M.Sc. in 2006/2007, this paper formed part of my examination for Development and Growth (EC428).