Search Results
Working Paper
Monetary Policy, Real Activity, and Credit Spreads : Evidence from Bayesian Proxy SVARs
This paper studies the interaction between monetary policy, financial markets, and the real economy. We develop a Bayesian framework to estimate proxy structural vector autoregressions (SVARs) in which monetary policy shocks are identified by exploiting the information contained in high frequency data. For the Great Moderation period, we find that monetary policy shocks are key drivers of fluctuations in industrial output and corporate credit spreads, explaining about 20 percent of the volatility of these variables. Central to this result is a systematic component of monetary policy ...
Working Paper
Monetary Stimulus amid the Infrastructure Investment Spree: Evidence from China's Loan-Level Data
We study the impacts of the 2009 monetary stimulus and its interaction with infrastructure spending on credit allocation. We develop a two-stage estimation approach and apply it to China's loan-level data that covers all sectors in the economy. We find that except for the manufacturing sector, monetary stimulus itself did not favor state-owned enterprises (SOEs) over non-SOEs in credit access. Infrastructure investment driven by nonmonetary factors, however, enhanced the monetary transmission to bank credit allocated to local government financing vehicles in infrastructure and at the same ...
Working Paper
The Local-Spillover Decomposition of an Aggregate Causal Effect
This paper presents a method to decompose the causal effect of government defense spending into: (i) a local (or direct) effect, and (ii) a spillover (or indirect) effect. Each effect is measured as a multiplier: the unit change in output of a one unit change in government spending. We apply this method to study the effect of U.S. defense spending on output using regional panel data. We estimate a positive local multiplier and a negative spillover multiplier. By construction, the sum of the local and spillover multipliers provides an estimate of the aggregate multiplier. The ...
Working Paper
House Price Growth Interdependencies and Comovement
This paper examines house price comovement across U.S. metropolitan areas (MSAs). We develop a Markov-switching framework that includes a spatial similarity element based on distances between MSAs. Our approach allows for house price comovements that occur due to similar timing of downturns across groups or clusters of MSAs. The inclusion of the spatial element improves the model fit compared to a standard endogenous clustering model. We find seven clusters of MSAs, where each cluster experiences idiosyncratic house price downturns, plus one distinct national house price cycle. Notably, only ...
Working Paper
A New Tool for Robust Estimation and Identification of Unusual Data Points
Most consistent estimators are what Müller (2007) terms “highly fragile”: prone to total breakdown in the presence of a handful of unusual data points. This compromises inference. Robust estimation is a (seldom-used) solution, but commonly used methods have drawbacks. In this paper, building on methods that are relatively unknown in economics, we provide a new tool for robust estimates of mean and covariance, useful both for robust estimation and for detection of unusual data points. It is relatively fast and useful for large data sets. Our performance testing indicates that our baseline ...
Working Paper
Hot money and quantitative easing: the spillover effect of U.S. monetary policy on Chinese housing, equity and loan markets
We study a factor-augmented vector autoregression model to estimate the effects of changes in U.S. monetary policy, as well as changes in U.S. policy uncertainty, on the Chinese economy. We find that since the Great Recession, a decline in the U.S. policy rate would result in a significant increase in Chinese regulated interest rates, and rise in Chinese housing investment. One possible reason for this is the substantial inflow of hot money into China. Responses of Chinese variables to U.S. shocks at the zero lower bound are different from that in normal times, which suggest structural ...
Working Paper
The Double-Edged Sword of Global Integration: Robustness, Fragility & Contagion in the International Firm Network
We estimate global inter-firm networks across all major industries from 1981 through 2016 and provide the first empirical tests for both robust (beneficial) and fragile (harmful) network behavior, relating firms' health with global integration. More connected firms are less likely to be in distress and have higher profit growth and equity returns, but are also more exposed to direct contagion from distressed neighboring firms and network level crises. Our analysis reveals the centrality of finance in the international firm network and increased globalization, with greater potential for crises ...
Working Paper
Impacts of Monetary Stimulus on Credit Allocation and Macroeconomy: Evidence from China
We develop a new empirical framework to identify and estimate the effects of monetary stimulus on the real economy. The framework is applied to the Chinese economy when monetary policy in normal times was switched to an extraordinarily expansionary regime to combat the impact of the 2008 financial crisis. We show that this unprecedented monetary stimulus accounted for as high as a 4 percent increase of real gross domestic product (GDP) growth rate by the end of 2009. Monetary transmission to the real economy was through bank credit allocated disproportionately to financing investment in real ...
Working Paper
House Price Growth Interdependencies and Comovement
This paper examines house price comovement across U.S. metropolitan areas (MSAs). We develop a Markov-switching framework that includes a spatial similarity element based on distances between MSAs. Our approach allows for house price comovements that occur due to similar timing of downturns across groups or clusters of MSAs. The inclusion of the spatial element improves the model fit compared to a standard endogenous clustering model. We find seven clusters of MSAs, where each cluster experiences idiosyncratic house price downturns, plus one distinct national house price cycle. Notably, only ...