PUBLICATIONS
Firm-Level Uncertainty and the Transmission of Monetary Policy (with
Aeimit Lakdawala) [
Working Paper]
Forthcoming at The Review of Economics and Statistics
The Effect of Monetary Policy on Firm-Level Uncertainty (with
Aeimit Lakdawala) [
Working Paper]
Economics Letters, Vol 232, 111319, November 2023
The International Spillover Effects of US Monetary Policy Uncertainty (with
Aeimit Lakdawala and
Matthew Schaffer) [
Working Paper] [
Code] [
Online Appendix]
Journal of International Economics, Vol 133, 103525, November 2021
WORKING PAPERS
Monetary Policy and Firm Heterogeneity: The Role of Leverage Since the Financial Crisis (with
Min Fang and
Aeimit Lakdawala) [
PDF]
Revise and Resubmit at Management Science
Abstract: We show that the role of leverage in explaining firm-level responses to monetary policy changed around the 2007-09 financial crisis. Stock prices of firms with high leverage were less responsive to conventional monetary policy shocks in the pre-crisis period but have become more responsive to unconventional monetary policy since the crisis. Using expected volatility measures from firm-level options, we further document that financial markets have been aware of this change.
We then interpret these findings through a parsimonious three-period model of firm financing with default risk. The model highlights two competing channels: firms with high leverage face steeper borrowing costs reflecting their financial overhang, making them less responsive to policy that works through the risk-free rate; but, when policy compresses credit spread in bond markets, high-leverage firms benefit disproportionately. Before the crisis, conventional monetary policy worked mainly through risk-free rates, so the first channel dominated. Since the crisis, large-scale asset purchases have compressed credit spreads, strengthening the second channel.
Financial Consolidation, Corporate Finance and Firm Investment in the Business Cycle (with
Sotirios Kokas and
Raoul Minetti) [
PDF]
Currently Under Review
Abstract: We study the influence of financial consolidation on firms’ cyclical behavior. We construct a dynamic model in which banks extract rents from non-competitive lending relationships. Calibrating the model to US data, we show that after bank consolidation the weakening in firms’ bargaining power vis-à-vis banks enhances precautionary liquidity accumulation and equity issuance following positive shocks, increasing the shock sensitivity of investment. Using matched firm-bank data, we find that the US bank consolidation has raised the procyclicality of equity issuance, liquidity accumulation and investment for small publicly-traded firms. The analysis suggests that bank consolidation especially raises the relevance of productivity shocks.
Younger Households’ Inflation Is More Responsive to Monetary Policy (with
Aeimit Lakdawala) [
PDF]
Currently Under Review
Abstract: When the Federal Reserve raises interest rates, prices faced by younger households fall more than prices faced by older households. Using age-specific distributional consumer price indices together with high-frequency monetary policy shocks, we document a monotone age gradient in inflation responses, from households under 25 through households 75 and older. A simple decomposition combining BLS major-group CPI responses with age-specific CEX expenditure shares accounts for most of the gap between the youngest and oldest households. Transportation and medical care drive the result: younger households spend disproportionately on transportation (including motor fuel, vehicles, and auto insurance), whose prices respond strongly to monetary policy, while older households spend disproportionately on medical care, whose prices respond less.
Do Firms Care About Monetary Policy Uncertainty? Evidence from Earnings Calls (with
Min Fang and
Qing Li) [
PDF]
Currently Under Review
Abstract: While monetary policy uncertainty (MPU) has been studied extensively at the macroeconomic level, how individual firms perceive it remains underexplored. We construct a text-based measure of firm-level MPU from the transcripts of 197,074 quarterly earnings calls, capturing the share of each call in which monetary policy and risk are jointly discussed. We document three stylized facts: firms do care about monetary policy uncertainty, though attention is concentrated in a minority of calls; this attention rises in the days before an FOMC meeting and resolves on the announcement day; and it is concentrated in monetary-policy-sensitive sectors, most notably financial firms. We then establish a causal fact: exploiting high-frequency monetary shocks around FOMC announcements, we find that firms that discussed MPU in the prior quarter are roughly half as sensitive to monetary shocks, with the dampening concentrated on contractionary surprises. Thus, communicating monetary policy uncertainty to investors appears to insulate firm value from adverse monetary policy news.
The Impact of Local Price Stickiness on Monetary Policy Transmission(with
Nir Eilam) (working paper coming soon)
Abstract: Conventional theory suggests that monetary policy has stronger real effects when prices adjust slowly. We provide the first evidence on geographic variation in price stickiness and its consequences for monetary policy transmission. Using retail scanner data that cover a significant share of U.S. retail consumption from 2006 to 2019, we construct county-level measures of price stickiness. Variation in these measures is driven by differences in local consumption bundles across goods with differing inherent stickiness. We then examine how county-specific price stickiness affects the transmission of monetary policy to employment. We find that local price stickiness substantially impacts responsiveness to monetary shocks: the employment response in sticky price counties is over twice the magnitude of flexible price counties.
PROJECTS IN PROGRESS
Uncertainty and Nominal Price Stickiness
Monetary Policy, Job Search and Productivity
with Andre Mouton and Aeimit Lakdawala
The Geographic Effects of Unconventional Monetary Policy
CONFERENCE PRESENTATIONS
Western Economic Association International - June 2026 (Denver, CO)
Wake Forest Empirical Macroeconomics Workshop - March 2023 (Winston-Salem, NC)
The Society for Economic Measurement - August 2022 (Calgary, Canada)
International Association for Applied Econometrics - June 2022 (London, UK)
Computing in Economics and Finance - June 2022 (Dallas, TX)
I-85 Macroeconomics Workshop - April 2022 (Columbia, SC)
Southern Economic Association Meetings - November 2021 (Houston, TX)
Rotterdam School of Management's Corporate Finance Day - October 2021
RCEA Money, Macro and Finance Conference - July 2021
Workshop on Empirical Monetary Economics - December 2019 (Paris, France)
Midwest Macroeconomics Meetings - November 2019 (East Lansing, Michigan)
Computing in Economics and Finance - June 2019 (Ottawa, Canada)
