I can predict the movement of heavenly bodies, but not the madness of crowds.
-- Isaac Newton
Working Papers
“The Complexity and Source of Small Bank Systemic Risk” (Available Upon Request)
Abstract: The large segment of U.S. commercial banks with under $1 billion in assets is often regarded as a collection of institutions whose performance varies idiosyncratically, posing limited macroeconomic risk. In contrast to this view, I document substantial comovement in the profitability of small banks. More strikingly, I find that this comovement cannot be explained by shared exposure to macroeconomic shocks, suggesting that its origins lie within the financial system itself. These findings uncover an overlooked channel of systemic risk in the commercial banking sector and highlight that such risk need not originate solely from large institutions.
“Measuring Dynamic Transmission using Pass-Through Impulse Response Functions”
Abstract: I propose the pass-through impulse response function (PT-IRF) as a novel reduced-form empirical approach to measuring transmission channel dynamics. In essence, a PT-IRF quantifies the propagation of a shock through the Granger causality of a specified set of endogenous variables within a dynamical system. This approach has fewer informational requirements than alternative methods, such as structural parameter and empirical policy counterfactual exercises. A PT-IRF only requires the specification of a reduced-form VAR and identification of a shock of interest, bypassing the need to either build a structural model or identify multiple shocks. I demonstrate the flexibility of PT-IRFs by empirically analyzing the indirect dynamic transmission of oil price shocks to inflation and output via interest rates, as well as the indirect dynamic effect of monetary policy shocks on output via changes in credit supply.
“Monetary Transmission Through Community and Noncommunity Bank Lending”
Abstract: This paper examines the dynamic macroeconomic effects of monetary transmission through community and noncommunity bank lending in the United States. I find that while both types of banks amplify the impact of monetary policy shocks on output, community banks exhibit a more delayed and persistent amplificatory influence than their noncommunity counterparts. These results suggest that continued decline in community banks’ market share may dampen the efficacy of monetary policy over longer horizons. Moreover, the adverse real effects of monetary tightening are likely to be longer-lasting for small business borrowers who depend on community banks for funding.
“Efficient Aggregation in Heterogeneous Agent Models with Bounded Rationality” (with David Evans)
Abstract: Akeychallenge in heterogeneous agent models with bounded rationality is the intensive computational burden of repeatedly aggregating policy functions within equilibrium solvers. This cost scales with belief heterogeneity, creating a severe bottleneck. We propose a fast aggregation method that replaces repeated summations with a compact representation of aggregate demand as a function of prices, delivering speedups of several orders of magnitude over conventional approaches while preserving accuracy. Demonstrated in a model with several dimensions of belief heterogeneity, our method directly overcomes a central obstacle to simulating boundedly rational heterogeneous agent economies and extends the scope of feasible applications.
“The Evolution of Community Bank Interconnectedness”
Abstract: I find that the community banking sector in the United States has become more interconnected since the global financial crisis, which implies greater exposure to systemic risk and increased vulnerability in future financial crises. I estimate a hierarchical dynamic factor model using a Bayesian approach to extract posterior distributions of national, regional, and state-level latent drivers of quarterly fluctuations in state-average community bank return-on-equity for all 50 US states. The resulting estimates show evidence of both considerable national comovement and state-specific idiosyncrasy with no signs of significant regional comovement. Furthermore, the results show a decrease in the intensity of idiosyncratic dynamics of state-level community bank profitability since the crisis, along with an increase in national comovement across most states.
Publications
[1] “Measuring economic activity in the presence of superstar MNEs” (with Philip Economides) Economics Letters (2023)
Works in Progress
“False Discovery Rate of Impulse Response Analysis in Macroeconomics” (with Noah Gade)
“International Evidence on Monetary Policy Transmission: High-Frequency Analysis of Central Bank Communications” (with Aeimit Lakdawala and Saroj Bhattarai)
“Uncertainty and the Price Puzzle” (with Sebastian Laumer)
“Monetary Transmission via Expectations in DSGEs with Bounded Rationality” (with Edder Martínez Lazo)
Other Works & Publications
[4] “A Replication of ‘The Macroeconomic Impact of Europe’s Carbon Taxes’ by Metcalf and Stock (2023)” (with Thomas Ash) I4R Discussion Paper Series (2024)
[3] “Mass Reproducibility and Replicability: A New Hope” (with Abel Brodeur, Derek Mikola, Nikolai Cook, and many others) IZA Discussion Paper (2024)
[2] “News Shocks under Financial Frictions: A Comment on Görtz et al. (2022)” (with Thomas Ash and Ethan Struby) I4R Discussion Paper Series (2023)
[1] “Using deep learning to examine the correlation between transportation planning and perceived safety of the built environment” (with Justin Hollander, Alphonsus Adu-Bredu, Minyu Situ, and Shabnam Bista) Environment and Planning B: Urban Analytics and City Science (2021)
Software
DynamicFactorModeling.jl
Julia package for simulating and estimating multi-level/hierarchical dynamic factor models (HDFMs).