Chen Abstract: This paper studies the cross-sector R&D allocations in decentralized equilibrium in an innovation network, where superstar firms might arise as the outcome of knowledge accumulation within sectors. Decentralized equilibrium might be inefficient due to over-investment in sectors in which these superstars emerge. In response, the policymaker can improve the long-run welfare by subsidizing under-invested sectors with a slowed knowledge accumulation process.
Yu Abstract:
This paper studies the effectiveness of Quantitative Easing (QE) under different policy regimes in a continuous-time framework. Supply change of treasuries affect its price in a segmented market with intermediaries’ inelastic bond demand. I study the impulse response to an aggregate uncertainty shock under three policy regimes: QE as a one-time MIT shock, QE as a pre-announced policy rule contingent on uncertainty shocks, and QE as unexpectedly introduced and announced to be rule-based policy instrument in the future.