Economics · University of Rochester
Joseph Lansley
I am a PhD candidate in Economics at the University of Rochester, working on international macroeconomics.
Research
Working Papers
When Brexit Means Brexit: Recovering Trade Policy Expectations from UK Import Stockpiling
We use pre-Brexit stockpiling dynamics to recover expectations over the magnitude and timing of post-Brexit trade costs. Our identification hinges on a model of inventory management in the presence of future trade policy risk, disciplined by the high-frequency boom-bust dynamics of UK imports around Brexit deadlines. We find that the expected trade costs of Brexit were perceived to be large but declined with successive deadline revisions. In contrast, the credibility of proposed Brexit deadlines was highest at the final deadline. These anticipatory effects are obscured in low-frequency trade data, biasing estimates of expected trade costs toward zero.
Work in Progress
Optimal Time-Consistent Dollar Liquidity Provision
I study the interaction of dollar swap lines with U.S. safe asset market power. The U.S. can exercise market power over its assets’ liquidity premium provided dollar liquidity is credibly scarce during crisis. Yet when crises occur, it has an ex post incentive to provide abundant dollar liquidity through swap lines to prevent disorderly sales of U.S. debt. In a two-country model of optimal safe asset issuance, I show that this time consistency problem erodes U.S. market power by increasing the price elasticity of foreign demand for Treasuries. I quantify this effect empirically by identifying an increase in the price elasticity of demand among swap line recipients after 2008, relative to countries excluded from the network. Matching these elasticity changes in a calibrated structural model, I find the post-crisis convenience yield on U.S. assets would have been significantly higher if the U.S. could commit to greater scarcity of dollar liquidity, reversing its observed decline.
Convenience Yields and Optimal Imbalances
We study the optimal foreign liability dynamics of a monopolistic issuer of securities which are both safe, because they span otherwise uninsurable states; and convenient, because they provide liquidity and collateral services to the rest of the world. In a price-taking equilibrium, the interaction of seigniorage extraction and incomplete markets generates divergent debt dynamics. But when the issuer internalizes its market power, the equilibrium converges to a unique and stable steady state. We derive a sufficient statistic condition depending solely on the elasticity of demand that characterizes when the issuer optimally continues to accumulate external debt. Under empirically plausible conditions, optimal policy implies a large initial trade deficit which is ultimately taxed away to maintain market power.