Working Papers
Misallocation as a Source of Business Cycles: The Case of the 1970s Oils Recessions (Job Market Paper, link)
Abstract: I study the role of petroleum and price allocation regulations in the US recessions of the 1970s. Regulations prevailing in the 1970s inhibited the ability of the oil industry to adjust prices or reallocate products in response to a supply shock. To assess the degree to which oil products were badly allocated, I combine several data sources on regional patterns of reported shortages, wholesale prices, and automobile sales. I show that industry prices become unusually dispersed during the years of binding regulation, while shortage patterns suggest under-provision of motor gasoline to the East Coast during the events of the Arab Oil Embargo. These shortage patterns also suggest spillovers from gasoline disruptions to falling automobile sales in early 1974. I calibrate a multi-sector general equilibrium model and find that these regulations may have amplified the welfare loss from the embargo shock by a factor of 1.8. In extensions of the model featuring wasteful rationing rules and frictional adjustments in the automobile sector, these regulations can triple the welfare effects of the supply shock.
A New Measure of State Consumption: Construction and Applications (with Abhi Gupta, link)
Abstract: The absence of a long-running measure of U.S. state-level consumption impedes the study of many questions. We address this constraint by estimating a new, annual, state-level panel of retail consumption for 1970-2015 using official consumption data and newly-digitized sales tax records. We apply our estimates to two questions whose study has been hampered by lack of data. First, we ask whether banking integration increases inter-state consumption risk sharing and find it only does so via raising output comovement. Second, using military spending shocks we estimate consumption fiscal multipliers that are positive and larger than estimates using existing consumption datasets.
Publications
Securities Financing and Asset Markets: New Evidence (with Thomas B. King, Review of Finance (2024), link)
Abstract: Using survey data on secured funding arrangements provided by broker-dealers for their clients---a class of contracts that includes bilateral repo---we document that financing rates, collateral haircuts, lending maturities, and position limits move strongly together over time and across asset classes. Liquidity of the underlying securities, as opposed to their volatility or credit risk, is the main driver of this behavior, with dealer balance-sheet constraints also playing a role in the funding of less-liquid security types. A simple model of dealer-client interaction rationalizes these findings. Instrumenting with changes in market conventions, we find that funding conditions had little effect on cash security markets between 2011 and 2019, but the tightening of terms during the market stress of early 2020 likely impaired liquidity and reduced asset returns to some degree.
The Term Structure and Inflation Uncertainty (with Stefania D'Amico and Athanasios Orphanides, Journal of Financial Economics (2020), link)
Abstract: To assess the importance of inflation risk for nominal Treasury yields, a novel quadratic term structure model with time-varying inflation risk is estimated using survey-based inflation uncertainty. The resulting yield decomposition captures very diverse macroeconomic dynamics of inflation and real risk premiums (large and positive during the 1980s but small and negative post-2008) and generates sensible high-frequency estimates of expected inflation and real short rates over a long sample. The explicit link between the model-implied factors and macro fundamentals reveals that short- but not long-run fluctuations are unspanned by yields, consistent with an interest rate policy unresponsive to transient inflation shocks.