Date of Award


Degree Type


Degree Name

Doctor of Philosophy (PhD)

Graduate Group


First Advisor

Jesús Fernández-Villaverde


Business cycle study is one of the major fields in macroeconomics. My dissertation combines micro evidence and quantitative models to contribute new mechanisms to the understanding of business cycles. It consists of two chapters that study the roles of supply chain management and inter-sectoral reallocation in business cycles, respectively. In Chapter 1, I study the role of supply chain management in amplifying business cycle fluctuations. I incorporate the extensive margin, i.e., the number of intermediate input varieties into a real business cycle model. Using a dataset of supply chain relationships among US firms, I first document that increases in the number of suppliers are correlated with increases in intermediate input expenditures, total factor productivities, and costs of managing suppliers. Based on these facts, I develop a model in which firms trade off the productivity benefit (return to variety) of accessing more varieties with the (fixed) cost of managing these varieties. The extensive margin adjustment introduces a return to scale into production and amplifies productivity shocks: In my estimated model with multiple industries and a production network, the effect of industry productivity shocks on GDP fluctuations is one-fourth larger than in a (conventional) model where the extensive margin is absent. In Chapter 2, I study the business cycles with resource reallocation between two sectors, the manufacturing and the service sectors through the lens of land prices and capital investment. I construct the quarterly commercial land price series using land transaction data in China and document a negative correlation between the land price and the aggregate investment, as opposed to the positive correlation in the US. With sectoral productivity processes estimated, a real business cycle model with a manufacturing and a service sector is used to explain the negative correlation. A positive export (manufacturing good) price shock increases the demand for tradable manufacturing goods and attracts capital and labor from the non-tradable service sector, by which only land is used. Aggregate investment rises because the manufacturing sector is more capital intensive. Land price, on the other hand, falls as the return to land decreases.

Included in

Economics Commons