Policy Uncertainty and Foreign Investors’ Entry Mode Choice: Greenfield vs. Cross-Border M&A[Revision requested, Journal of International Economics] with Ivan Kandilov and Asli Leblebicioglu [paper]
This paper studies how economic policy uncertainty across U.S. states affects foreign investment. When uncertainty rises, multinational firms shift from building new facilities (greenfield investment) to buying existing businesses (mergers and acquisitions) —except when uncertainty is extremely high, which depresses both. Our results are based on a novel, detailed firm-level data from 2005–2019. The effects are strongest in industries where sunk costs are high and in states with greater bureaucratic hurdles. Firms' previous investment experience in a given state and investment mode also drives their decisions in the face of uncertainty. The study highlights how uncertainty shapes not just the level, but also the mode, of foreign direct investment.
Euro Area Inflation and Unemployment: Phillips Curve and Forecasting [submitted] with Emrehan Aktug and Saroj Bhattarai [paper] An important relationship in macroeconomics is the Phillips curve, capturing the trade-off between unemployment and inflation. We examine inflation and unemployment dynamics in the Euro Area, focusing on the challenges that arise when trying to estimate this relationship using standard methods. A common problem is that changes in inflation and unemployment often happen alongside shifts in monetary policy, which makes it hard to capture their true relationship. To address this issue, we use U.S. monetary policy shocks as an instrument to isolate external shocks to the Euro Area in a panel local projection framework. This approach reveals a clear and robust trade-off between inflation and unemployment. Importantly, we find no evidence that this relationship has changed in the period following the COVID-19 pandemic. In addition, we introduce new panel models for forecasting inflation using data from 17 Euro Area countries. We show that this approach produces more accurate forecasts— one year ahead or longer—than the common practice of modeling each country on its own.
Measuring and Forecasting Inflation in China with Disaggregated Price Data [submitted] with Barry Goodwin and Zhongyuan You [paper]
Forecasting inflation is essential for setting sound economic policy, but it is notoriously difficult—especially in fast-changing economies like China. In this paper, we explore the challenges of predicting inflation in China, where data limitations, sectoral variation, and structural shifts complicate the task. We document that the unobserved components model proposed by Stock and Watson (2015) can help forecast Chinese inflation.
The 1934 Turkish Surname Law as an Early Application of Matching Theory [submitted] with Umut Dur [paper] Our analysis reframes the Surname Law not only as a nation-building reform but also as a natural experiment in early matching design, yielding lessons for contemporary allocation problems involving priority classes.
Policy Uncertainty and Foreign Investment: State-level Analysis [in progress] with Ivan Kandilov and Asli Leblebicioglu We study the short- and long-term impacts of policy uncertainty across U.S. states on inbound foreign investment. Leveraging granular data on cross-border M&As and greenfield investment over a 15-year period, we demonstrate that higher policy uncertainty leads to a decline in greenfield investment, but a rise in the incidence of M&As. Investors also pursue smaller deals to preserve flexibility. We compare our results against those from our firm-level analysis in Dur, Kandilov, and Leblebicioglu (2025).
Credit and Exchange Rates [in progress] with Saroj Bhattarai We propose nominal credit as a new fundamental to explain nominal exchange rate movements. We first show that for various countries, higher credit today is robustly correlated with future exchange rate depreciation against the US dollar. In a formal econometric exercise, we next find that including credit in the empirical model improves both in-sample and out-of-sample fit substantially. We present a dynamic equilibrium open economy model that rationalizes these empirical findings.
Forecasting with Inflation Components [in progress] with Andrew Glover
Sudden Stops and Misallocation [in progress] with Sevcan Yesiltas
Accepted/Published Journal Articles
Uninsured income risk and the welfare effects of reducing global imbalances European Economic Review (2025) with Andy Glover and Jacek Rothert [paper]
This paper presents an alternative to tariff-based strategies for addressing the United States’ persistent trade and financial imbalances. We show that modest subsidies to encourage household savings can fully eliminate trade and foreign asset imbalances—while also boosting wages, reducing inequality, and improving global welfare.
Seat allocation problem in public transportation Scandinavian Journal of Economics (2025) with Oguz Afacan and Umut Dur [paper] Passengers often care not only about which seat they receive, but also who they sit near and the environment they’ll be in—preferences shaped by comfort, convenience, and social factors. Transportation systems and institutions also impose seating rules, such as for health, supervision, or compatibility. Unstructured (previous) systems like Southwest Airlines’ open boarding can create inefficiencies and discomfort by ignoring these layered preferences. We propose an algorithm that provides a structured, rules-based assignment mechanism that reflects real-world constraints. It honors early reservations, supports group seating, and enforces institutional restrictions—offering a coordinated, policy-compliant, and behaviorally informed alternative to ad hoc arrangements.
A generalized time iteration method for solving dynamic optimization problems with occasionally binding constraints (2021) Computational Economics with Enrique Martinez-Garcia [paper][MATLAB programs]
We introduce a new computational method called Generalized Time Iteration (GTI) to solve economic models which include constraints that can be active only occassionally (e.g. households' borrowing constraints, or firms' investment constraints).The GTI method simplifies the process of finding solutions to these models, offering faster results compared to traditional techniques. Mind the gap! - A monetarist view of the open-economy Phillips curve (2020) Journal of Economic Dynamics and Control withEnrique Martinez-Garcia [paper][appendix]
We examine how global economic factors influence domestic inflation. We develop a theoretical model that integrates money and credit markets into an open-economy New Keynesian framework, demonstrating that global liquidity—measured by indicators like G7 average credit and money supply growth—can serve as effective proxies for global economic slack. Using 50 years of U.S. data, our empirical analysis reveals that these global liquidity measures significantly outperform domestic indicators in forecasting inflation, particularly since the mid-1980s. This suggests that in an increasingly interconnected global economy, domestic inflation is more closely tied to international financial conditions than previously understood.
We study whether Turkey’s large current account deficits, particularly in 2011 and 2015, can be considered optimal. We use a theoretical framework that relates a country’s borrowing behavior to its expected national income growth relative to the world. Our findings show that Turkey’s 2015 deficit may be justified if its economy continues to grow as in the past or as forecasted by experts. However, the 2011 deficit appears excessive unless exceptionally high growth continues. We also simulate potential sudden stops, showing how such events could severely constrain consumption and disrupt economic stability.
Inflation as a global phenomenon - Some implications for inflation modeling and forecasting (2018) Journal of Economic Dynamics and Control with Enrique Martinez Garcia [paper][appendix]
We provide a theoretical framework for how inflation in one country is influenced by economic conditions in others. Using data from 14 advanced countries, we show that incorporating global economic factors into inflation forecasting models significantly improves accuracy compared to relying on domestic indicators alone. These findings suggest that inflation is increasingly driven by international forces, underscoring the need for policymakers to monitor global trends—not just local ones—when setting economic policy.
The winners and losers of tax reform: An assessment under financial integration (2017) Journal of Economic Dynamics and Control [paper]
This paper examines the effects of reducing or eliminating the capital income tax. Using a heterogeneous-household model with two countries, I find that a capital income tax cut leads to unintended consequences despite stimulating large capital investment funded by the world: the reforming country experiences reduced household wealth and increased inequality, especially harming lower-income individuals.Conversely, the other country benefits, particularly its poorer citizens.This suggests that such unilateral tax reforms can have complex and uneven impacts, potentially disadvantageous to the majority in the reforming nation while benefiting others abroad.
Book Chapters
Exploring the nexus between inflation and globalization under inflation targeting through the lens of New Zealand's experience (2017) with Enrique Martinez-Garcia and Mehmet Ali SoytaşIn Current Approaches In Economics Studies, Chapter V, Pp 55-57, Ed. H. Goksu. SRA Academic Publishing, 2017. [paper]
