Lingxuan "Sean" Wu

I am a PhD Candidate in Economics at Harvard University. My research interests are in macroeconomics, finance, and behavioral economics. I am on the 2024-25 academic job market.

Contact: lingxuanwu@g.harvard.edu 

CV: here 

Job Market Paper

Abstract: We propose a theory of shallow thinking to capture people’s limited understanding of the long causal chains involved in the propagation of shocks. We cast general equilibrium as a system of causal relations in a directed cyclic graph. Estimation from our qualitative survey suggests that, on average, people think about only 2.6 steps of propagation, overlooking much of the graph and deviating significantly from rational expectations. Our theory implies that longer causal chains have diminishing influence on beliefs. Applying shallow thinking to a New Keynesian model with active monetary policy reconciles several bond market puzzles and yields macroeconomic consequences: (i) long-term interest rates underreact to cost-push shocks but overreact to monetary policy shocks; (ii) inflation expectations negatively predict bond excess returns; and (iii) the inflation response to cost-push shocks is stronger than under rational expectations and, contrary to that paradigm, increases with shock persistence. In a real business cycle model, relative to rational expectations, shallow thinking amplifies and prolongs output fluctuations from productivity shocks and predicts negative future stock excess returns.

Other Working Papers

Work in Progress

Teaching