This paper introduces a new internal propagation mechanism into a standard RBC model and shows that the proposed mechanism improves the statistical properties of the model significantly. In the model, there are two types of agents (L and H-skill) and three consumption goods as well as an investment good. Agents differ in terms of the jobs that they are specialized in and the composition of their consumption baskets. Moreover, both types of agents have non-homothetic preferences which induce a strong desire to consume the good that the other type produces. The resulting mechanism, in response to a positive investment shock, works as follows: as high-skill agents are employed in a more capital intensive sector, their productivities, and so their incomes, increase relatively more initially. But they spend their additional income mostly on service goods in which low-skill agents are specialized, so the demand for the low- skill labor increases as well. As their income rises, low-skill agents start consuming relatively more basic goods, which in turn generates additional demand for high-skill labor that is not related to the original technology shock. Consequently, this mechanism feeds into itself and a circular interaction between the two types of agents emerges as a result of the imposed preference structure and the division of labor. I show, through a series of quantitative experiments, that this interaction serves as a very strong internal propagation mechanism that can significantly increase the amplification of the exogenous shocks. I also discuss the way the same mechanism gives rise to an endogenous variation in the capital content of the goods consumed over the business cycle and how this endogenous variation generates more persistence in the model. 

In this paper, there are two types of agents who are heterogeneous in terms of the skill to produce different goods and their consumption bundles. The model introduces a dynamic mechanism to sort agents into different occupations based on their comparative advantages in the production of goods over the business cycle. In this environment, I study the effects of an investment shock, which is also correlated with the skill distribution, in propagating the exogenous shocks. The model shows that after a positive investment shock, the fraction of the agents working in the goods sector increases on impact and since those who start working in the goods sector replace their service intensive consumption baskets with goods intensive consumption ones, the demand for goods increases more relative to the services along the expansion, which in return results in even more agents being hired in the goods sector. I show quantitatively that this endogenous mechanism alone can generate sizable amplification and persistence, even without labor-leisure choice, in contrast to the standard models. The model also suggests an alternative resolution to what is known as productivity puzzle in the literature. This is because the one-to-one link between output and productivity does not exist in the model, in contrast to the standard models. Instead, the productivity is determined by the aggregate skill distribution and how agents are sorted between two sectors over the business cycle. 

I study the model in Morris and Shin (2002) under strategic information transmission constraints between the public authority and private agents in order to investigate how the precision of the public signal affect the quality of the communication. In the model, a central bank (CB) communicates with two private agents. All three players have different interests over the state of the economy and receive informative but noisy signals when the state is realized. I find that CB only cares about the average bias of the private agents, and CB can truthfully reveal her signal only if the average bias is below a certain threshold. More importantly, as the CB's signal precision increases, the possibility of truthful communication increases in her signal precision which in return enhances her ability to communicate with the private agents.

Research In Progress
Boundaries of Economic Growth: Ownership Inequalities and Finance
On The Mathematical Structure of Pareto Optimal Exchange (Edgeworth Box) Economies
The Existence of Correlated Equilibria under Perfect Competition