Search Results
Working Paper
Household Credit and Local Economic Uncertainty
This paper investigates the impact of uncertainty on consumer credit outcomes. We develop a local measure of economic uncertainty capturing county-level labor market shocks. We then exploit microeconomic data on mortgages and credit-card balances together with the crosssectional variation provided by our uncertainty measure to show strong borrower-specific heterogeneity in response to changes in uncertainty. Among high risk borrowers or areas with more high risk borrowers, increased uncertainty is associated with housing market illiquidity and a reduction in leverage. For low risk borrowers, ...
Journal Article
Did quantitative easing work?
Did QE lower yields and stimulate the economy? What about risks? Weighing the evidence requires a bit of theory.
Working Paper
Dynamic market participation and endogenous information aggregation
This paper studies information aggregation in financial markets with recurrent investor exit and entry. I consider a dynamic general equilibrium model of asset trading with private information and collateral constraints. Investors differ in their aversion to Knightian uncertainty: When uncertainty is high, some investors exit the market. Since exiting investors' information is not fully revealed by prices, conditional return volatility and risk premia both increase. I use data on institutional investors' holdings of individual stocks to show that investor exits indeed move negatively with ...
Journal Article
Do Stress Tests Reduce Credit Growth?
Stress tests are supposed to ensure your access to credit during the next downturn, but some critics claim that they also limit your access to credit today. We test that theory.
Working Paper
Real Estate Taxes and Home Value: Winners and Losers of TCJA
In this paper, we examine the impact of changes in the federal tax treatment of local property taxes stemming from the implementation of the Tax Cuts and Jobs Act (TCJA) in January 2018 on local housing markets. Using county-level house price information and IRS tax data, we find that capping the federal tax deduction of real estate taxes at $10,000 has caused the growth rate of home value to decline by an annualized 0.8 percentage point, or 15 percent, in areas where real estate taxes as shares of taxable income exceeded the national median. Additionally, these areas with a high real estate ...
Working Paper
Funding Liquidity Creation by Banks
Relying on theories in which bank loans create deposits—a process we call “funding liquidity creation”—we measure how much funding liquidity the U.S. banking system creates. Private money creation by banks enables lending to not be constrained by the supply of cash deposits. During the 2001–2020 period, 92 percent of bank deposits were due to funding liquidity creation, and during 2011–2020 funding liquidity creation averaged $10.7 trillion per year, or 57 percent of GDP. Using natural disasters data, we provide causal evidence that better-capitalized banks create more funding ...
Journal Article
Banking Trends: The Rise of the Single-Family REIT
A new investment vehicle spread rapidly after the Great Financial Crisis. Should we be concerned?
Working Paper
Single-Family REITs and Local Housing Markets
We study the rise of single-family real estate investment trusts (SF-REITs) using a novel property-level dataset. SF-REITs tend to buy homes in neighborhoods near city centers, where housing supply is relatively elastic and residents are on the lower rungs of the homeownership ladder. Exploiting spatial differences, we find that SF-REIT growth modestly raises prices and increases overall housing supply, with individual ownership rising at a similar rate. However, we find no evidence that SF-REITs reduce house purchase financing accessibility—mortgage approval rates and borrower credit ...
Working Paper
The Effects of Competition in Consumer Credit Markets
Using changes in financial regulation that create exogenous entry in some consumer credit markets, we find that increased competition induces banks to become more specialized and efficient, while deposit rates increase and borrowing costs for riskier collateral decline. However, shadow banks change their credit policy when faced with more competition and aggressively expand credit to riskier borrowers at the extensive margin, resulting in higher default rates. These results show how the form of intermediation can shape economic fluctuations. They also suggest that increased competition can ...
Working Paper
Temporal Focal Points and Economic Outcomes Evidence from U.S. Mortgage Lending
Temporal focal points shape high-stakes economic outcomes. We investigate this proposition in the U.S. mortgage market by documenting novel within-month patterns in lending. Using confidential Home Mortgage Disclosure Act (HMDA) data, we show that applications arrive smoothly throughout the month, yet approximately half of all originations occur in the final week. The Black approval gap, 2.4 percentage points unexplained at the start of the month, narrows to zero by month’s end. Underperforming loan officers and high-turnover lending institutions amplify this convergence. Demand-side ...