Economist: Board of Governors of the Federal Reserve System, CV
Fields: Corporate finance, macroeconomics
Applications to: Commercial real estate, banking, unconventional policies, and measurement in statistical surveys
Please Note: The views expressed are solely the responsibility of the authors and should not be interpreted as reflecting the views of the Board of Governors of the Federal Reserve System or of anyone else associated with the Federal Reserve System.
Active Working Papers
Corporate and Commercial Real Estate (CRE)
(1) CRE Redevelopment Options and the Use of Mortgage Financing, with David Glancy and Lara Loewenstein, R&R
Summary: Guided by a model where aging properties have the option to be redeveloped at a cost, we construct a measure of redevelopment option values and show that buyers use mortgage financing based on the estimated redevelopment option and the purchaser’s experience in renovation or construction activity. These effects grew in magnitude during the pandemic, consistent with COVID-19 increasing the importance of renovation and redevelopment options, in particular for office properties.
(2) The Value of Renegotiation Frictions: Evidence from Commercial Real Estate, with David Glancy and Lara Loewenstein
Summary: Develops a tradeoff theory model in which lenders vary in their modification technologies that is consistent with facts on modification and delinquency rates in the commercial real estate market. In equilibrium, the calibrated model also produces higher LTVs and spreads for CMBS relative to portfolio lenders, consistent with the data. Model counterfactuals demonstrate the heterogeneous effects of reducing modification frictions at CMBS.
Macro-CRE
(3) On Commercial Construction Activity's Long and Variable Lags, with David Glancy and Lara Loewenstein
Summary: Using unique microdata on over 200,000 commercial construction projects that includes a panel of the phase history for each project, we present evidence on the significant number of abandonments out of planning and their state dependence. A model built to be consistent with these findings has the testable implication that supply is more elastic when there are more “shovel ready” projects available to advance to construction. We use local projections to validate that this prediction holds in the cross-section for U.S. cities.
Macro-corporate
(4) Aggregate Implications of Deviations from Modigliani-Miller: A Sufficient Statistics Approach, with David Zeke
Summary: Develops a sufficient statistics approach to identify the aggregate consequences of distortions to firm investment in a class of general equilibrium models that can accommodate rich general equilibrium effects such as endogenous firm entry.
(5) The Economy-Wide Gains from Resolving Debt Overhang, with David Zeke; Online Appendix
Summary: Debt overhang induces private costs near default for incumbents. In equilibrium, resolving debt overhang reduces entry and increases the leverage of entrants.
Journal Articles and Articles Accepted for Publication
(7) Recourse as Shadow Equity: Evidence from Commercial Real Estate Loans, with David Glancy, Lara Loewenstein, and Joe Nichols, 2023.
Real Estate Economics, 51(5): 1108-1136
Summary: Recourse loans are allowed lower loan rate spreads and higher LTVs, consistent with recourse reducing default risk. Recourse also affects loan modification negotiations by providing additional bargaining power to the lender. Loans with recourse were half as likely to receive accommodation during the COVID-19 pandemic.
(6) Intermediary Segmentation in the Commercial Real Estate Market, with David Glancy, John Krainer, and Joe Nichols, 2022.
Journal of Money, Credit and Banking, 55(4): 2029–2080.
Summary: Develops a model that can match novel facts on the loan portfolios of bank and nonbank lenders in the commercial real estate market. Examines implications for how the market responds to supply shocks and regulations.
(5) Did QE Lead Banks to Relax their Bank Lending Standards? Evidence from the Federal Reserve's LSAPs, with Stephan Luck and Tom Zimmermann, 2022.
Journal of Banking and Finance, 138 (May).
Summary: Exploits banks’ differential exposure to MBS prior to QE1 and QE3 to examine the extent to which QE1 and QE3 affected lending standards and risk-taking.
(4) Across the Universe: Policy Support for Employment and Revenue in the Pandemic Recession, with Ryan Decker, Byron Lutz, and Chris Nekarda, 2021.
American Economic Association: Papers & Proceedings, 111:267–271.
Note: Papers & Proceedings volumes are not peer reviewed.
Summary: Develops comprehensive estimates of the universe of economic activity to characterize how four government direct lending programs—the Paycheck Protection Program, the Main Street Lending Program, the Corporate Credit Facilities, and the Municipal Lending Facilities—relate to economic activity in the United States. Longer working paper that also examines how our estimates compare to alternative data sources available as FEDS Working Paper 2020-099.
Video Link to Andreas Lehnert discussing this work's impact (3:17:10-3:19:17)
(3) How do Capital Requirements Affect Loan Rates? Evidence from High Volatility Commercial Real Estate , with David Glancy, 2021.
Review of Corporate Finance Studies, 11(1):88--127.
Summary: The HVCRE rule passed through to loan rates. For each one percentage point increase in required capital, loan rates increased by about 10 basis points. This elasticity is an important input into models performing cost/benefit analyses of increasing capital requirements.
(2) Misallocation Costs of Digging Deeper into the Central Bank Toolkit, with David Zeke, 2020.
Review of Economic Dynamics, 38:94–126.
Summary: Central bank large-scale purchases of private assets can have different effects on the allocation than purchases of government assets.
(1) Poker Player Behavior After Big Wins and Big Losses, with Gary Smith and Michael Levere, 2009.
Management Science, 55.9:1547–1555.
Summary: Poker players tend to play less cautiously after a big loss.
Policy Notes
(4) From-Whom-to-Whom Relationships in the Financial Accounts of the United States: A New Methodology and Some Early Results, with Michael M. Batty and Elizabeth Holmquist, FEDS Notes. Washington: Board of Governors of the Federal Reserve System, March, 24, 2023, https://doi.org/10.17016/2380-7172.3273.
(3) Accounting for COVID-19 Related Funding, Credit, Liquidity, and Loan Facilities in the Financial Accounts of the United States, with Matthew Hoops, FEDS Notes. Washington: Board of Governors of the Federal Reserve System, July 30, 2021, https://doi.org/10.17016/2380-7172.2956.
(2) An Aggregate View of Bank Lending Standards and Demand, with David Glancy and Rebecca Zarutskie, FEDS Notes. Washington: Board of Governors of the Federal Reserve System, May 04, 2020, https://doi.org/10.17016/2380-7172.2546.
(1) Changes in Monetary Policy and Banks' Net Interest Margins: A Comparison across Four Tightening Episodes, with Jared Berry, Felicia Ionescu, and Rebecca Zarutskie. FEDS Notes. Washington: Board of Governors of the Federal Reserve System, April 19, 2019, https://doi.org/10.17016/2380-7172.2352.
Resting Papers
Accounting For Productivity Dispersion over the Business Cycle, with David Zeke
Summary: Accounting decompositions of changes in aggregate productivity ratios that can assess the contribution of changes in the mean and dispersion of firm-level productivity ratios. Most movements in past U.S. business cycles are driven by changes in the mean of firm-level productivity ratios.