NBER Working Papers and Publications by Jae Sim

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Working Papers and Chapters and Reporter Articles

November 2016Inflation Dynamics During the Financial Crisis
with Simon Gilchrist, Raphael Schoenle, Egon Zakrajšek: w22827
Using a novel dataset, which merges good-level prices underlying the PPI with the respondents’ balance sheets, we show that liquidity constrained firms increased prices in 2008, while their unconstrained counterparts cut prices. We develop a model in which firms face financial frictions while setting prices in customer markets. Financial distortions create an incentive for firms to raise prices in response to adverse financial or demand shocks. This reaction reflects the firms’ decisions to preserve internal liquidity and avoid accessing external finance, factors that strengthen the countercyclical behavior of markups and attenuate the response of inflation to fluctuations in output.

Published: Simon Gilchrist & Raphael Schoenle & Jae Sim & Egon Zakrajšek, 2017. "Inflation Dynamics during the Financial Crisis," American Economic Review, American Economic Association, vol. 107(3), pages 785-823, March. citation courtesy of

April 2014Uncertainty, Financial Frictions, and Investment Dynamics
with Simon Gilchrist, Egon Zakrajšek: w20038
Micro- and macro-level evidence indicates that fluctuations in idiosyncratic uncertainty have a large effect on investment; the impact of uncertainty on investment occurs primarily through changes in credit spreads; and innovations in credit spreads have a strong effect on investment, irrespective of the level of uncertainty. These findings raise a question regarding the economic significance of the traditional "wait-and-see" effect of uncertainty shocks and point to financial distortions as the main mechanism through which fluctuations in uncertainty affect macroeconomic outcomes. The relative importance of these two mechanisms is analyzed within a quantitative general equilibrium model, featuring heterogeneous firms that face time-varying idiosyncratic uncertainty, irreversibility, nonco...
November 2012Misallocation and Financial Frictions: Some Direct Evidence From the Dispersion in Borrowing Costs
with Simon Gilchrist, Egon Zakrajšek: w18550
Financial frictions distort the allocation of resources among productive units--all else equal, firms whose financing choices are affected by such frictions face higher borrowing costs than firms with ready access to capital markets. As a result, input choices may differ systematically across firms in ways that are unrelated to their productive efficiency. We propose an accounting framework that allows us to assess empirically the magnitude of the loss in aggregate resources due to such misallocation. To a second-order approximation, the framework requires only information on the dispersion in borrowing costs across firms, which we measure--for a subset of U.S. manufacturing firms--directly from the interest rate spreads on their outstanding publicly-traded debt. Given the observed dispers...

Published: Review of Economic Dynamics Volume 16, Issue 1, January 2013, Pages 159–176 Special issue: Misallocation and Productivity Cover image Misallocation and financial market frictions: Some direct evidence from the dispersion in borrowing costs ☆ Simon Gilchrista, b, , Jae W. Simc, , Egon Zakrajšekd

August 2007Investment during the Korean Financial Crisis: A Structural Econometric Analysis
with Simon Gilchrist: w13315
This paper uses firm-level panel data to analyze the role of financial factors in determining investment outcomes during the Korean financial crisis. Our identification strategy exploits the presence of foreign-denominated debt to measure shocks to the financial position of firms following the devaluation that occurred during the crisis period. Structural parameter estimates imply that financial factors may account for 50% to 80% of the overall drop in investment observed during this episode. Our estimates also imply that foreign-denominated debt had relatively little effect on aggregate investment spending. Counterfactual experiments suggest sizeable contractions in investment through this mechanism for economies that are more heavily dependent on foreign-denominated debt however.

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