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Working Paper
It's Not Who You Know—It's Who Knows You: Employee Social Capital and Firm Performance
We show that the social capital embedded in employees' networks contributes to firm performance. Using novel, individual-level network data, we measure a firm's social capital derived from employees' connections with external stakeholders. Our directed network data allow for differentiating those connections that know the employee and those that the employee knows. Results show that firms with more employee social capital perform better; the positive effect stems primarily from employees being known by others. We provide causal evidence exploiting the enactment of a government regulation that ...
Newsletter
How FAIR Plans Confronted Redlining in America
Access to financial services, including insurance, is vital for the growth and development of communities. Without banks issuing residential mortgages and business loans, it is extremely difficult for people to purchase homes and grow their businesses. Without property insurance, banks will be reluctant to provide such loans. Thus, the inability to access property insurance makes communities more vulnerable to cycles of disinvestment and decline. In this Chicago Fed Letter, I examine the Fair Access to Insurance Requirements (FAIR) plans, how they addressed the issues of insurance ...
Working Paper
The Effect of Student Loan Payment Burdens on Borrower Outcomes
Rising student loan debt and concerns over unaffordable payments provide a rationale for the broad class of “income-driven repayment” (IDR) plans for federal student loans. These plans aim to protect borrowers from delinquency, default, and resulting financial consequences by linking payments to income and providing forgiveness after a set repayment period. We estimate the causal effect of IDR payment burdens on loan repayment and schooling outcomes for several cohorts of first-time IDR applicants using a regression discontinuity design. Federal student loan borrowers who are not required ...
Working Paper
The Causal Effects of Expected Depreciations
We estimate the causal effects of a shift in the expected future exchange rate of a local currency against the US dollar on a representative sample of firms in an open economy. We survey a nationally representative sample of firms and provide the one-year-ahead nominal exchange rate forecast published by the local central bank to a random sub-sample of firm managers. The treatment is effective in shifting exchange rate and inflation expectations and perceptions. These effects are persistent and larger for non-exporting firms. Linking survey responses with administrative census data, we find ...
Working Paper
The Effect of Student Loan Payment Burdens on Borrower Outcomes
Rising student loan debt and concerns over unaffordable payments provide a rationale for the broad class of “income-driven repayment” (IDR) plans for federal student loans. These plans aim to protect borrowers from delinquency, default, and resulting financial consequences by linking payments to income and providing forgiveness after a set repayment period. We estimate the causal effect of IDR payment burdens on loan repayment and schooling outcomes for several cohorts of first-time IDR applicants using a regression discontinuity design. Federal student loan borrowers who are not required ...
Working Paper
The Missing Tail Risk in Option Prices
This paper contributes to the literature on deviations from rational expectations in financial markets and to the literature on evaluating density forecasts. We first develop a novel statistic to evaluate the overall accuracy of distributional forecasts, and find two methods that yield accurate distributional forecasts. We then propose another statistic to examine the relative accuracy over the entire distribution range. Our results indicate more oil price realizations in the left tail than predicted. We argue that this finding points to a persistent behavioral forecasting bias and a ...
Discussion Paper
Consumer Credit Card Payment Deferrals During the COVID-19 Pandemic
In response to the economic hardships stemming from COVID-19, many U.S. card-issuing banks offered measures to assist their customers who were financially affected by the pandemic. Unlike previous disaster assistance programs that were typically short in duration and localized, the COVID-19 pandemic affected millions of consumers across the country for a protracted period of time and required application of broad-based relief measures. These measures, along with federal and state stimulus and benefit payments, provided some stability to many consumers’ financial circumstances during ...
Working Paper
Identifying Taste-Based Discrimination: Effect of Black Electoral Victories on Racial Prejudice and Economic Gaps
I test for the causal impact of Black electoral victories in local elections on White Americans’ attitude toward Black Americans. Using Race Implicit Attitude Test scores as a measure of racial prejudice and close-election regression-discontinuity design for causal inference, I find Black electoral victories cause measures of racial bias to rise, by 4% of the average Black-White difference in IAT scores. Simultaneously, they widen racial gaps in unemployment and mortgage denials. Interpreting these close electoral victories as instrumental variables, I find a large causal effect of ...
Working Paper
Are Real Assets Owners Less Averse to Inflation? Evidence from Consumer Sentiments and Inflation Expectations
Using data from the University of Michigan Surveys of Consumers, we document a significant negative association between consumer sentiment and inflation expectations, controlling for prevailing inflation in the economy. We further show that consumer sentiments of homeowners and stockowners are more sensitive to expected inflation than those of other consumers, a disparity at odds with the notion that owning such assets provides hedges against inflation. Leveraging data from the Survey of Consumer Expectations, we find three factors that help account for this difference. First, assets owners' ...
Working Paper
Which Types of Unbanked Households Are More (or Less) Likely to Open a Bank Account?
Using multi-year survey data, we conduct a regression model analysis to examine which types of unbanked households are more likely to open a bank account and which types are less likely. We proxy for households’ likelihood of opening a bank account using their prior banking status and interest in having a bank account. Unbanked households who previously had a bank account and are interested in having a bank account are more likely to open an account. These households tend to be more educated, to be native-born, to use alternative financial services, and to have access to digital technology. ...