Jenny Chan

I am a Policy Advisor at the Bank of England and a member of the Centre for Macroeconomics.

I received my Ph.D. in Economics from Universitat Pompeu Fabra. You can find my CV here.

jenny.chan[at]bankofengland[dot]co[dot]uk
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Research


My research interests include macroeconomics, monetary policy, and information frictions.

Working Papers

  • Monetary Policy and Sentiment-Driven Fluctuations
    Revise and Resubmit. Journal of Economic Theory
    Sentiments, or beliefs about aggregate demand, can be self-fulfilling in models departing slightly from the complete information benchmark in the New Keynesian framework. Through its effect on aggregate variables, the policy stance determines the degree of complementarity in firms’ production (pricing) decisions and consequently, the precision of endogenous signals that firms receive. As a result, aggregate fluctuations can be driven by both fundamental and non-fundamental shocks. The distribution of non-fundamental shocks is endogenous to policy, introducing a novel trade-off between stabilizing output and inflation. Both strong inflation targeting and nominal flexibilities increase the variance of non-fundamental shocks, which are shown to be suboptimal. Moreover, the Taylor principle is no longer sufficient to rule out indeterminacy. Instead, an interest rate rule that places sufficiently low weight on inflation eliminates non-fundamental volatility and thereby the output-inflation trade-off.

    Coverage: On returning inflation back to target − speech by Catherine L Mann
  • Energy Prices and Household Heterogeneity: Monetary Policy in a Gas-TANK
    with Sebastian Diz and Derrick Kanngiesser (submitted)
    How does household heterogeneity affect the transmission of an energy price shock? What are the implications for monetary policy? We develop a small open economy TANK model that features labor and an energy import good as production inputs (Gas-TANK). Given complementarities in production inputs, higher energy prices reduce the labor share of total income. Due to borrowing constraints, this translates into a drop in aggregate demand. Higher price flexibility insures firm profits from adverse energy price shocks, further depressing labor income and demand. We illustrate how the transmission of shocks in a RANK versus a TANK depends on the degree of complementarity between energy and labor in production and the degree of price rigidities. Optimal monetary policy is less contractionary in a TANK and can even be expansionary when credit constraints are severe. Finally, the contractionary effect of an energy price shock on demand cannot be generalized to alternate supply shocks, as the specific nature of the supply shock affects how resources are redistributed in the economy.

    Coverage:
    Other versions: Bank of England Staff Working Paper, Centre for Macroeconomics Discussion Paper 2022-16, SSRN
  • Spatial Inequality, Regional Growth and Economic Geography
    with Sebastian Ellingsen and Helen Simpson
    in preparation for the Oxford Handbook of Income Distribution and Economic Growth
  • Transportation Networks and Structural Transformation in Regions
    with Sebastian Ellingsen (draft available upon request)
    Since 1900, rural regions in Europe experienced more rapid income growth and rapid industrialization than urban regions. Did lower transportation costs enable this rural catchup? We explore this question using historical data from Norway and European regions since 1900. In both cases, we find that improvements in market access accelerated structural transformation out of agriculture in regions that were initially specialized in agriculture. To interpret this pattern, we build a multi-sector dynamic spatial model equilibrium of structural transformation that we take to the data. Through counterfactuals exercises, we find that lower transportation costs accelerated structural transformation in rural locations, but are insufficient to account for the full catchup observed in the data. Our findings suggest alternative mechanisms are important in accounting for rural catchup across European regions.

Work in Progress

  • Sticky Production and Monetary Policy
    with Sebastian Diz and Derrick Kanngiesser (draft coming soon)
    We study a New Keynesian model where production inputs and pricing decisions are made under information frictions. Firm production is constrained by inputs chosen before shocks are known, i.e., based on expectations of demand. We show that the assumption of real rigidities versus nominal rigidities is not innocuous, as assuming the presence of either or both affects the pass-through of demand shocks to aggregate output and inflation. When production inputs are made under imperfect information about demand shocks, the impact on aggregate demand is dampened. When both production inputs and pricing decisions are made under imperfect information about demand shocks, the pass-through to aggregate demand is complete.

Discussions


Pass-Through of Cost-Push Shocks
by Isabel Gödl-Hanisch and Manuel Menkhoff
slides

Looking Through Supply Shocks versus Controlling Inflation Expectations: Understanding the Central Bank Dilemma
by Paul Beaudry, Thomas J. Carter, and Amartya Lahiri
slides

Experience-Based Heterogeneity in Expectations and Monetary Policy
by Lucas Radke and Florian Wicknig
slides

Hitting the Elusive Inflation Target
by Francesco Bianchi, Leonardo Melosi, and Mattias Rottner
slides

This website is used to disseminate my work and the views expressed here do not represent those of the Bank of England or any of its policy committees.