Welcome! I am a Lecturer in Economics at the University of Edinburgh.

My research interests lie in macroeconomics, specifically production networks and computational methods.

I completed my PhD at the Universitat Pompeu Fabra. Click here to find my CV.

Contact information:

• Email: lauri.esala@ed.ac.uk
• Mailing address:
  School of Economics,
  University of Edinburgh,
  31 Buccleuch Pl,
  Edinburgh EH8 9JS

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Work in progress

Supply Chain Dynamics with Search Frictions (draft)

This paper develops a dynamic theory of endogenous supply chain formation that speaks to two properties of real-world production networks. First, firms often depend on a limited number of key buyers and suppliers. Second, buyer-supplier links are time-consuming to form, and difficult to replace if lost. Consequently, the loss of trade partners can act as a potent channel of shock propagation. In my setup, forward-looking firms build their supply chains in an environment where link formation is sluggish due to search frictions, and both shocks and bilateral search for better partners while matched create uncertainty about the value of each link. By leveraging continuous time, and developing a new simulation-based solution method, I sidestep firms’ problem of accounting for a complex set of firm-to-firm interactions across the supply chain each period. In steady state, I show how firms’ forward-looking considerations about supply chain fragility and growth potential affect matching policies. I also study the consequences of large-scale supply chain severances. Firms' endogenous matching behavior speeds up the recovery, relative to a benchmark where the regeneration of supply chains is subject to a time-dependent adjustment friction. The most productive firms are able to rebuild their supply chains the fastest, sometimes at the expense of less productive firms.

Low Interest Rates, Weak Banks and Zombie Firms (with Andrea Sy)