Yinxi Xie - Research

Publications

"Convenience Yield, Inflation Expectations, and Public Debt Growth"
Review of Financial Studies, 2025, with Julie Zhiyu Fu and Jian Li.
[SSRN][Working Paper][Online Appendix]

"Expectations and the UIP Puzzles when Foresight is Limited"
Journal of International Economics, 2025, with Seunghoon Na.
[SSRN][Working Paper]

"Unconventional Monetary and Fiscal Policy"
Review of Economic Dynamics, 2025, with Jing Cynthia Wu.
[SSRN][NBER WP][ECB conference video]

"The Role of International Financial Integration in Monetary Policy Transmission"
IMF Economic Review, 2024, with Jing Cynthia Wu and Ji Zhang.
[SSRN][NBER WP]

"Fiscal and Monetary Stabilization Policy at the Zero Lower Bound: Consequences of Limited Foresight"
Journal of Monetary Economics, 2022, with Michael Woodford.
[NBER WP][Press: Economist, NY Fed Blog]

"Monetary Policy in an Era of Global Supply Chains"
Journal of International Economics, 2020, with Shang-Jin Wei.
[NBER WP][2022 Pu Shan Award]

"Policy Options at the Zero Lower Bound When Foresight is Limited"
AEA Papers and Proceedings, 2019, with Michael Woodford.

"Machiavellian Experimentation"
Journal of Comparative Economics, 2017, with Yang Xie.
[Predoc publication]

Working Papers

"Fiscal Policy: Financing and Indebtedness," with Jing Cynthia Wu, Shihan Xie, and Ji Zhang.

R&R at American Economic Journal: Macroeconomics. This version: October 2026. [SSRN]

Abstract: We conduct a large-scale information randomized controlled trial to study households’ beliefs about the effectiveness of fiscal policy. We survey over 12,000 households across the five largest eurozone countries with varying debt-to-GDP ratios. The key finding is that the perceived effectiveness of fiscal stimulus depends jointly on the financing method and the country’s debt burden: expected effects on GDP growth decline with public debt under debt financing but remain broadly stable under tax financing. Open- and closed-ended responses link this pattern to concerns about debt sustainability and future repayment burdens. Finally, we develop a two-country New Keynesian model of a monetary union that formalizes this mechanism, which reproduces the central empirical pattern observed in the survey.

"On the Wedge between the PPI and CPI Inflation Indicators," with Shang-Jin Wei.

R&R at American Economic Journal: Macroeconomics. This version: June 2024. [NBER WP][Press: Brookings, NBER Homepage]

Abstract: While two strands of the literature suggest that producer price index (PPI) inflation, in addition to or instead of consumer price index (CPI) inflation, should be a targeting variable in a monetary policy rule, the distinction between the two is only important when they do not co-move strongly. Our first contribution is to document that their correlation has indeed fallen substantially since the start of this century. Our second contribution is to propose a model to understand this divergence based on expanding global supply chains. Our theory also produces additional predictions that are confirmed in the data. As such changes are structural rather than temporary, and so does the co-movement between CPI-PPI inflation, it implies that central banks need to take the change in the production structure of the economy into account when deciding their inflation target.

"Trade Policy Surprises and U.S. Convenience Yields: Evidence from Prediction Markets," with Fulin Li.

This version: October 2026. [SSRN]

Abstract: We exploit transaction-level prices from tariff-related prediction markets to identify unexpected changes in U.S. trade policy at high frequency during the 2025 trade war. Unexpected tariff hikes lower U.S. Treasury convenience yields across maturities, contrary to conventional flight-to-safety forces. The effect, however, depends crucially on the source of prevailing uncertainty. When uncertainty is unrelated to trade policy, the response is weaker and, in some cases, becomes positive, consistent with flight-to-safety. By contrast, when uncertainty is related to trade policy, the decline is amplified, especially at longer maturities. Decomposing convenience yields, we find that the decline mainly reflects a lower safety component at short maturities and a lower liquidity component at long maturities. Our findings show that Treasury privilege is state-dependent, varying with the source of uncertainty.

"Understanding Inflation Dynamics: The Role of Government Expenditure," with Chang Liu.

R&R at European Economic Review. This version: August 2026. [SSRN][BCB Conference video][Press: The Canadian Press]

Abstract: This paper studies the impact of government expenditure on inflation through the lens of an augmented Phillips curve derived from a structural New Keynesian model. Our estimation results, based on external instruments, show that the augmented Phillips curve has a flatter slope than the canonical specification, and government expenditure has a negative coefficient. Changes in government expenditure account for a substantial portion of inflation variations and provide new insights into the "missing disinflation" puzzle. We also observe a negative response of both inflation and inflation expectations to government expenditure shocks, which can be rationalized by the supply-side channel that we emphasize.

"Unconventional Policy and Inflation," with Jing Cynthia Wu and Ji Zhang.

This version: January 2026. [SSRN][NBER WP][Press: Yahoo! Finance]

Abstract: We study the effects of unconventional monetary and fiscal policies on inflation dynamics. Using multiple complementary empirical approaches, including event studies, vector autoregressions, and regional panel regressions, we find little evidence that these policies contributed meaningfully to inflation in the past decades. The key economic mechanism operates through a disinflationary supply-side channel in the Phillips curve, which offsets the upward pressure on inflation from the usual demand channel. We demonstrate this mechanism both theoretically and empirically.

"Macroeconomic Impacts of the Transition to Net Zero in Small Open Economies: A Case Study for Canada," with Tatjana Dahlhaus et al.

R&R at Journal of Financial Stability. This version: August 2026. [Bank of Canada Climate Policy Project]

Abstract: Climate change presents significant macroeconomic challenges, particularly for small open economies deeply integrated into global trade and energy markets. Focusing on Canada, we analyze the macroeconomic implications of the transition to a low-carbon economy, paying attention to global and domestic spillovers. On the domestic side, we introduce Energy-ToTEM (E-ToTEM), an extension of the Bank of Canada’s projection model ToTEM, which captures energy sector dynamics, substitution effects, and policy interactions. To account for international forces, we use a global, multi-sector, multi-region general equilibrium model, allowing us to assess international climate policy transmission and global demand implications for Canada. Our results indicate that, under the net-zero scenario, global carbon prices rise persistently through 2050. The transition leads to significant macroeconomic adjustments, including an 8% reduction in world GDP and a 7% decline in Canadian GDP by 2050. Modest but persistent inflationary pressures emerge. Under the historical monetary policy rule, interest rates rise slightly. Using a set of simple monetary policy rules, we map out the inflation–output trade-off implied by the transition and show that strict inflation targeting amplifies output losses (2.2 ppt), while a more accommodative stance mitigates GDP impacts at the cost of temporarily higher inflation (1 ppt). These results highlight a significant role for monetary policy in managing the transition and suggest that some departure from historical rules may be warranted.