Working Paper

EMPCT Working Paper Series No. 2026-02
106 pages | PDF Download | PDF in Browser

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Citation
Choi, Jaedo, Andrei A. Levchenko, Dimitrije Ruzic, and Younghun Shim, “Superstars or Supervillains? Large Firms in the South Korean Growth Miracle,” March 2026.

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Abstract
We quantify the contribution of the largest firms to South Korea’s economic performance over the
period 1972-2011. Using firm-level historical data, we document a novel fact: firm concentration
rose substantially during the growth miracle period. To understand whether rising concentration
contributed positively or negatively to South Korean real income, we build a quantitative dynamic
heterogeneous firm small open economy model. Our framework accommodates a variety of potential
causes and consequences of changing firm concentration: productivity, distortions, selection
into exporting, scale economies, and oligopolistic and oligopsonistic market power in domestic
goods and labor markets. The model is implemented directly on the firm-level data and inverted
to recover the drivers of concentration. We find that most of the differential performance of the top
firms is attributable to higher productivity growth rather than increasingly favorable distortions.
Exceptional performance of the top 3 firms within each sector relative to the average firms contributed
20.8% to the 2011 real GDP and 6.6% to the net present value of welfare over the period
1972-2011. Thus, the largest Korean firms were superstars rather than supervillains.

EMPCT Working Paper Series No. 2026-01
80 pages | PDF Download | PDF in Browser

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Citation
Pfäuti, Oliver and Fabian Seyrich, “A Behavioral Heterogeneous Agent New Keynesian Model”, January 2026

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Abstract
We develop a behavioral Heterogeneous Agent New Keynesian model embedding
two empirically-disciplined features: households with high MPCs are more exposed
to aggregate income fluctuations, and households cognitively discount aggregate news.
Together, these features align the model with recent empirical evidence on the monetary
transmission, and their interaction generates a demand-driven amplification mechanism
making inflation stabilization particularly difficult for monetary policy after supply and
government spending shocks. We calibrate the model to micro evidence and find that
TFP shocks increase inflation twice as much as when abstracting from heterogeneity
and cognitive discounting, with the largest amplification component coming from their
complementarity.

EMPCT Working Paper Series No. 2025-10
54 pages | PDF Download | PDF in Browser

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Citation:
Howes, Cooper, Marc Dordal i Carreras, Olivier Coibion, and Yuriy Gorodnichenko, “How Monetary Policy Is Made: Lessons from Historical FOMC Discussions,” December 2025

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Abstract
We construct a new dataset of FOMC meeting transcripts from 1966 to 1990 to analyze the sources of heterogeneity in individual monetary policy preferences and study how this heterogeneity shapes policy decisions. Using these detailed discussions, we manually quantify and characterize each FOMC participants’ preferred policies along with their reasoning and justification. We show that participants’ beliefs about the effects of monetary policy—specifically, their perceived slope of the Phillips Curve—play a central role. Participants who believe monetary policy has stronger effects on real activity are more likely to cite output as a justification for easing, while those perceiving stronger price effects emphasize inflation as a reason for tightening. We then show that the Chair plays a unique and powerful role in reconciling these views, not just in setting policy rates, but also in minimizing dissent. The latter occurs because dissenters find their ability to influence policy in subsequent meetings is significantly curtailed.

EMPCT Working Paper Series No. 2025-04
65 pages | PDF Download | PDF in Browser

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Citation:
Erwan Gautier, Frédérique Savignac, and Olivier Coibion, “Firms’ Inflation and Wage Expectations During the Inflation Surge”, May 2025

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Abstract
Using a new survey of French firms’ inflation expectations that predates the inflation spike, we document i) evidence on the anchoring of inflation expectations during the inflation surge, and ii) the relevance of inflation expectations for firms’ decisions. First, we show that inflation expectations under-responded to the initial surge but then persistently overshot actual inflation dynamics. As inflation rose, firms initially perceived inflation to be less persistent than in previous years, an effect that dissipated over time. Second, we find that inflation expectations correlate with firms’ wage and price decisions. One-year expectations matter more than long-term expectations. During the inflation surge, wage and price decisions became increasingly disconnected from inflation expectations. This suggests that the scope for wage-price spirals is likely more limited than one might have expected from the surge in inflation and inflation expectations.

EMPCT Working Paper Series No. 2025-05
75 pages | PDF Download | PDF in Browser

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Citation:
Coibion, Olivier, Yuriy Gorodnichenko, “Inflation, Expectations and Monetary Policy: What Have We Learned and to What End?”, May 2025

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Abstract:
We review recent research and experiences linking inflation and expectations, emphasizing what has been learned since 2020. One clear lesson is that the inflation expectations of most economic agents have been and remain unanchored. The unanchored nature of inflation expectations, in combination with supply shocks, can explain much of the inflation surge and subsequent disinflation when viewed through the lens of an expectations-augmented Phillips curve, both in the U.S. and abroad. New policy frameworks are unlikely to address this feature of expectations. Only a communication strategy that breaks what we refer to as the “cycle of selective inattention” is likely to be successful, but it is probably already too late to stop the next inflation surge. 

EMPCT Working Paper Series No. 2025-08
28 pages | PDF Download | PDF in Browser

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Gorodnichenko, Yuriy; Georgarakos, Dimitris; Kenny, Geoff; and Coibion, Olivier, “The Impact of Geopolitical Risk on Consumer Expectations and Spending”, August 2025

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Abstract: Using novel scenario-based survey questions that randomize the expected duration of
the Russian invasion of Ukraine and Middle East conflict, we examine the causal impact of
geopolitical risk on consumers’ beliefs about aggregate economic conditions and their own
financial outlook. Expecting a longer conflict leads European households to anticipate a worsening
of the aggregate economy, with higher inflation, lower economic growth, and lower stock prices.
They also perceive negative fiscal implications, anticipating higher government debt and higher
taxes. Ultimately, households view the geopolitical conflict as making them worse off financially
and it leads them to reduce their consumption.

EMPCT Working Paper Series No. 2025-07
76 pages | PDF Download | PDF in Browser

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Citation: Choi, Jaedo; Cui, George; Shim, Younghun; and Shin, Yongseok, “The Dynamics of Technology Transfer: Multinational Investment in China and Rising Global Competition”, June 2025

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Abstract
US multinationals form joint ventures in China for market access and lower labor costs. However,
these ventures transfer knowledge to Chinese partners and local firms, increasing future
competition from China. While multinationals take into account these spillovers, they don’t account
for the impact on other US firms, potentially leading to over-investment from a US social
perspective. We establish three novel empirical facts on spillovers and competition effects. First,
Chinese parent firms of joint ventures become larger, export more, and grow technologically similar
to their US partners. Second, in industries with more joint ventures, even non-participating
Chinese firms grow larger and more technologically advanced. Third, US firms in these industries
experience negative impacts on their size, exports, and innovation. We then develop a two-country
growth model with oligopolistic competition and endogenous innovation and joint venture decisions.
For the US, joint ventures generate short-run gains that are outweighed by long-run losses
due to rising competition from China. Large US firms’ profits are higher with joint ventures, at
the expense of small firms’ profits and the real wage. Banning joint ventures from the beginning
would have raised US welfare by 1.2 percent but reduced China’s by 10.6 percent, as Chinese firms’
productivity growth is substantially delayed.