Research

Corporate Cash, Investment, and Uncertainty

job market paper

Using firm-level data from Compustat and FISD, TRACE, I empirically discovered that the correlation between firm investment levels and cash flow diminishes when the aggregate uncertainty level is high. Conversely, the correlation between firm cash dividend distributions and cash flow increases under these conditions. This finding is somewhat counterintuitive. I built a simple DSGE model with a flight-to-safety feature to match the empirical results. This occurs because the shareholder shifts her asset holding from a risky asset to a riskless asset, thereby squeezing the firm’s resources and behaving myopic. I also implemented a welfare analysis, and it shows that adding a flight-to-safety feature creates a welfare cost and is thus suboptimal.

Identifying Demand and Supply Shocks

with Dr. Marco Brianti

We used a new identification strategy to identify the effects of aggregate demand and aggregate supply shocks on real U.S. data. The simulation study and the robust test show that this identification strategy works well: (1) the estimated implied impulse response functions are consistent with the model-implied impulse response functions; (2) the estimated shocks and actual shocks are very highly correlated. The empirical results indicate that GDP is less persistent than inflation in response to demand shocks, whereas GDP is more persistent than inflation in response to supply shocks. Also, demand shocks are a more vital driver of boom-bust cycles than supply shocks.

Identifying Oil Uncertainty Shocks

Crude oil is one of the most crucial production inputs, and oil market turbulence should be a robust driver of the business cycle. Since the oil price is endogenously determined in the economy, identifying shocks associated with oil prices is not easy. This paper proposes a novel focus: oil price uncertainty shock, defined as the second-moment news shock to oil prices. The impulse response analysis, variance decomposition and historical decomposition show that the oil uncertainty shock is quantitatively important.

Does the Fair and Open Access Policy Increase LNG Imports? Evidence from the Establishment of PipeChina

with Dr. Zhongli Zhang and Dr. Weimin Nie

Fair and open access policy is one of the most important market-oriented reforms in China’s energy sector. The policy allows market participants to use LNG terminal infrastructure on a nondiscriminatory basis. Using a panel dataset covering all LNG receiving terminals in China from 2017 to 2025, this study employs a difference-in-differences framework to examine the impact of the fair and open access policy on LNG import volumes. After addressing potential endogeneity concerns and conducting a series of robustness checks, we find that the policy significantly increases LNG import volumes. Further heterogeneity analysis shows that the policy effects vary across geographical regions, with a stronger impact observed in South China. In addition, international LNG price arbitrage opportunities do not significantly affect the policy impact. Instead, the policy effect is stronger during periods of favorable economic conditions and in regions that faced higher downstream transmission constraints prior to policy implementation.