Wei Li's Homepage
I am an Associate Fellow at the Shanghai Advanced Institute of Finance (SAIF). My research focuses on macroeconomics and international finance, with a special interest in the implications of information frictions for global financial linkages and policy-making. I also work closely with government agencies on financial market development and capital account liberalization.
Full Vitae
CV (updated May 2025)
Contact
Working Papers
Rational Inattention and Real Exchange Rates, with Yulei Luo and Xiaowen Wang [PDF (March 2025)], submitted.
In this paper, we study the consumption-portfolio decision of individual households with limited information-processing capacity (i.e., rational inattention or RI) in a two-country equilibrium model with recursive utility. Under RI, individual households react gradually to asset return innovations and take the resulting long-run consumption risk into account, which leads to less volatile and less cross-country correlated stochastic discount factors. Despite the high correlation of international stock markets, our RI model can generate: (i) a close-to-zero or negative correlaion between relative consumption growth and real exchange rate depreciations (the Backus-Smith puzzle); (ii) smooth fluctuations in real exchange rates; and (iii) smooth consumption growth relative to real exchange rates.
Previously circulated as: Armington Elasticities and the Third-Country Effects of Trade Conflicts, CEPR Discussion Paper No. 17409
An Impossible Unity? The Effects of International Monetary Policy on Chinese Treasury Yields. with Zehao Li and Shuojun Peng
[available upon request]
Public Attention, Private Attention and Mutual Funds' Global Allocation, with Haoyuan Ding, Xiao Li, Guangyu Nie, submitted.
[available upon request]
Induced Uncertainty and Aggregate Wealth Accumulation
[available upon request]
Publications
Trade, FDI and Global Imbalances, with Guangyu Nie and Zi Wang (2020)
Journal of International Money and Finance, Volume 105, July 2020 (pdf) (ssrn)
We propose a multi-country dynamic general equilibrium model to quantify the implications of trade and FDI liberalizations for the surge of global trade and current account (CA) imbalances. We calibrate our model to replicate the evolution of bilateral trade and FDI flows across 5 major economies as well as their CA balances over 1996-2014. Our counterfactual experiments suggest that the decline in trade and FDI costs accounts for about half of the increase in global trade imbalances and a quarter of the increase in CA imbalances over this period. Moreover, we find that the openness of the Chinese economy after 2001 has little impacts on global imbalances, whereas the unbundling of the U.S. outward FDI is a major driver of global imbalances.
Journal of Economic Dynamics and Control 79, 1-20 (Lead Article) (pdf) (ssrn)
In this paper we examine the effects of elastic information-processing capacity (or optimal inattention) proposed in Sims (2010) on international consumption and income correlations in a tractable small open economy (SOE) model with exogenous income processes. We find that in the presence of capital mobility in financial markets, optimal inattention due to fixed information-processing cost lowers the international consumption correlations by generating heterogeneous consumption adjustments to income shocks across countries facing different macroeconomic uncertainty. In addition, we show that RI can also improve the model's predictions for the other key moments of the joint dynamics of consumption and income. Finally, we show that the main conclusions of our benchmark model do not change in an extension with capital accumulation.
Teaching
Undergraduate Courses
International Trade (2022 Teaching Evaluation: top 3.85% of College of Businesss, 6.66% of the whole university)
Master Courses
Research Methodology
Ph.D. Courses
Advanced Macroeconomics I & II
Seminars&Workshops
An online series of macro seminars that my colleagues and I organized to facilitate communication between Chinese and overseas scholars during the pandemic.
Interview
The World Today, CGTN, July 10, 2023