Publications“The Effects of Quantitative Easing on Bank Lending Behavior,” Review of Financial Studies, Nov (2017), 30(11): 3858–3887. (with O. Darmouni)
Banks’ exposure to large-scale asset purchases, as measured by the relative prevalence of mortgage-backed securities on their books, affects lending following unconventional monetary policy shocks. Using a difference-in-differences identification strategy, this paper finds strong effects of the first and third round of quantitative easing (QE1 and QE3) on credit. Highly affected commercial banks increase lending by 3% relative to their counterparts. QE2 had no significant impact, consistent with its exclusive focus on Treasuries sparsely held by banks. Overall, banks respond heterogeneously and the type of asset being targeted is central to QE.“Persistent Anti-Market Culture: A Legacy of the Pale of Settlement after the Holocaust,” American Economic Journal: Economic Policy, Aug (2013), 5(3): 189–226. (with I. Grosfeld and E. Zhuravskaya)
We estimate the long-term effects of Jewish presence in Europe before World War II, using discontinuity at the border of the “Pale of Settlement” area where Jews were allowed to live in the Russian Empire. Current residents of the Pale have lower support for the market, and are less entrepreneurial but more trusting compared to those outside the Pale. We suggest a mechanism and test for it: anti-Semitism generated persistent anti-market culture and trust among non-Jews. Consistent with this mechanism, anti-market attitudes and trust decrease with distance to pogroms controlling for historical Jewish presence. Self-identification and cohesion of a majority depends on the presence of a minority.
Working PapersThe Bond Lending Channel of Monetary Policy (with O. Darmouni and O. Giesecke)
An increasing share of firms' borrowing occurs through bond markets. We present high-frequency evidence from the Eurozone that bond-reliant firms are more responsive to monetary shocks: in contrast to standard bank lending channel predictions, unexpected ECB policy changes affect their stock prices by more, even conditional on total debt and industry fixed-effects. We develop an organizing framework to decompose the stock price, credit risk and investment response of large firms. We emphasize the role of corporate liquidity management: firms react to rate hikes by being prudent in good times, reducing investment in favor of hoarding liquid assets. Since bond financing is less flexible in bad times than relationship banking, this effect can rationalize why the mix of bank and bond financing matters for monetary transmission. A mitigating force is that bonds generally have longer duration and lower interest-rate pass-through relative to loans. Our findings suggest that the recent global growth in bond debt following quantitative easing could interact with conventional interest rate policy going forward.Exchange Rate Shocks and Quality Adjustments (with D. Goetz)
Do firms respond to cost shocks by reducing the quality of their products? Using microdata from a large Russian retailer that varies its offerings twice-yearly, we document that ruble devaluations are associated with a reduction in the observed material quality of products imported for resale, but that higher quality goods are also more profitable. We reconcile these facts using a simple multi-product sourcing model that features a demand system with expenditure switching, where more profitable products can be dropped more quickly after a cost shock. The estimated model shows that quality downgrading reduces average pass-through by 6% and has meaningful consequences for welfare.(Un)Competitive Devaluations and Firm Dynamics
This paper studies monetary and exchange rate policy in a world of global value chains. Using recent microdata from Japan and Russia, devaluations are shown to negatively affect exporters in terms of employment, domestic revenue and profitability relative to nonexporting firms. Given their substantial dependence on imported intermediate inputs, exporting firms are more exposed to marginal cost shocks following exchange rate movements. Standard macro models are too simplistic in their microstructure to capture these transmission channels. I propose a New Keynesian general equilibrium model with firm heterogeneity, varying intermediate import intensities, and international dollar pricing to explain the findings. Strategic complementarities improve the quantitative performance of the model without changing its qualitative properties. The new paradigm is successful in matching key firm-level moments as well as the evolution of inflation and net exports.
Work in ProgressTenure Effects in Firm-to-Firm Bargaining (with D. Goetz) Prices and Inventories After a Large Devaluation (with M. Golosov and V. Midrigan) Financial Innovation and Trade: Evidence from Cotton Futures Trading (with C. Steinwender) The Effects of Propaganda on Consumer Behavior
This paper studies the impact of state propaganda on consumer purchasing behavior by analyzing online spending patterns in Kazakhstan, Russia and Ukraine around the annexation of Crimea in March 2014. A significant relative demand shift towards local brands is observed in regions and cities of Russia where anti-western online search requests, a proxy for exposure towards state-sponsored media, become particularly high. Consumption in the northern regions of Kazakhstan, home to a substantial fraction of ethnic Russians, reacts in a similar manner compared to other parts of the country. Relative spending on Russian brands in Ukraine stays largely unresponsive throughout the whole period.