Abstract: China's sectoral employment adjusted primarily to the gradual resolution of U.S. trade policy uncertainty, rather than discretely to the 2001 WTO accession. Using province-level variation in exposure to the NTR gap over 1980--2010, we show that provinces more exposed to trade policy uncertainty experienced larger subsequent increases in manufacturing employment shares. This relationship is strongest in the early 1980s and then declines steadily toward zero over time, with little additional movement around 2001. We then develop a dynamic heterogeneous-firm model in which firms face fixed export start and continuation costs, destination-specific export opportunities, and time-varying beliefs over a two-state U.S. tariff regime. As the perceived probability of tariff reversion falls, firms become more willing to enter and remain in export markets, and these changes propagate gradually through exporter dynamics into manufacturing labor demand. Calibrated to Chinese micro moments, the model replicates the empirical finding. Counterfactuals show that a substantial share of the manufacturing-employment response is driven by credibility improvements before 2001, while the contribution of WTO accession is relatively small.

Abstract: We disentangle the intertwined roles of sales adjustment frictions and production adjustment frictions. We develop a dynamic general equilibrium heterogeneous firm model of international trade to study labor dynamics and export dynamics jointly. To export, heterogeneous plants pay sunk costs as well as variable trade costs, which depend on the history of exporting status. Plants' employment decisions are subject to convex and non-convex labor adjustment costs. Matching the model to the salient features on employment, sales and exports in Colombian plant-level data, we recover measures of a range of export and labor adjustment frictions. We relate these measures to those from models that abstract from either export frictions or labor adjustment frictions. We find that both export frictions and labor adjustment costs are essential for capturing the labor growth distribution, labor dynamics, churnings in export market, and labor growth premiums around the export margin.

Abstract: International trade moves ideas, not just goods. This paper studies how trade transmits macroeconomic shocks through knowledge diffusion and its implications for international business cycles. Using multi-country data on bilateral trade, patents, and citations, we document that countries with stronger trade linkages exhibit stronger GDP and TFP comovement and more intensive cross-border knowledge flows. Trade disruptions, identified from the U.S.--China trade war, reduce exports, patenting, and foreign knowledge absorption. We build an international real business-cycle model in which trade-mediated knowledge diffusion shapes innovation efficiency and thus aggregate productivity. The knowledge-diffusion channel of trade generates distinct international business-cycle dynamics that are absent from standard models with only goods-market linkages:  trade synchronizes productivity dynamics across countries, generating endogenous international comovement; trade shocks reshape future productivity path and become an important source of business-cycle comovement and volatility; and innovation shocks have international incidence as their gains diffuse through trade. 

Abstract: We argue that the interaction between liquidity constraints and firms' inventory management acts as a decelerator for monetary policy transmission. Empirically, we document that firms with higher operating leverage—indicative of tighter liquidity constraints—reduce their inventories significantly less in response to monetary tightening than their less constrained counterparts. To interpret these findings,  we develop a New Keynesian model in which firms face financial frictions while managing inventory to avoid stock-outs. Reducing stock-outs generates more internal funds for firms and thus lowers their risk of liquidity constraints. Such an incentive drives firms to cut back less on on-shelf goods to preserve internal liquidity in response to a monetary tightening, especially more liquidity-constrained ones. Using a calibrated model, we demonstrate that the deceleration mechanism weakens the impact of monetary policy on aggregate production by more than 20%, and the dampening effects are even stronger in economies featuring severer financial distortions and higher production and demand uncertainty. 

Abstract: This paper shows that inventories buffer the transmission of shocks through domestic and international production networks. Using sectoral trade and production data, I demonstrate that increased upstream and downstream linkages in production networks intensify shock propagation, while inventory holdings mitigate these effects. I develop a multi-country, multi-sector international real business cycle model that integrates inventory investment, production networks, and sector-level productivity shocks. I show that the model is consistent with empirical evidence on the amplifying effects of production networks and the dampening effects of inventory holdings. Furthermore, incorporating inventory investment enhances the model's ability to accurately capture production comovement, volatility, and cyclicality across countries and sectors.

Abstract: We develop a decomposition framework and use confidential U.S. Census data to show that pass-through to U.S. import prices during the U.S.–China trade dispute is incomplete among firms that continue importing the same products from the same countries. Previous findings of complete pass-through reflect a reallocation of imports toward higher-price firms and costlier new supplier relationships within product–country markets. We then build a model with firm-level import prices and sourcing strategies and estimate that most welfare losses arise from extensive-margin effects on the import price index, driven by sourcing adjustments of importers.  

Abstract: During the U.S.-China trade dispute, trade flows between the two nations are redirected through an intermediary country. I develop a novel merged dataset encompassing China-Intermediary trade and U.S.-Intermediary trade. I construct a trade dispute tariff exposure measure for the intermediate country, utilizing the average U.S. import tariff on China weighted by U.S. import from the intermediary. Through a Difference-in-Difference analysis, I document that the high-tariff-exposed countries experience a larger increase in the export to U.S. and the import from China than the countries with low exposure. The intensity of rerouting is heterogeneous across industries. Agriculture, being more challenging to relocate and involving fewer production stages, exhibits lower rerouting intensity than non-agriculture. Additionally, this rerouting phenomenon acts as a mitigating factor against the adverse impact of U.S. tariffs on Chinese imports. Notably, the trade elasticity of Chinese exports is overstated by 0.2 when not accounting for trade rerouting.