I am an assistant professor and Donald P. Jacobs scholar at the Kellogg School of Management, Northwestern University. My interests are empirical macroeconomics and household finance.


Kellogg School of Management
Finance Department
Northwestern University
2211 Campus Drive
Evanston, IL 60208

Working Papers

Revise and Resubmit at REStud

This paper studies how credit markets respond to policy constraints on household leverage. Exploiting a sharp policy-induced discontinuity in the cost of originating certain high-leverage mortgages, we study how the Dodd-Frank “Ability-to-Repay” rule affected the price and availability of credit in the U.S. mortgage market. Our estimates show that the policy had only moderate effects on prices, increasing interest rates on affected loans by 10-15 basis points. The effect on quantities, however, was significantly larger; we estimate that the policy eliminated 15 percent of the affected market completely and reduced leverage for another 20 percent of remaining borrowers. This reduction in quantities is much greater than would be implied by plausible demand elasticities and suggests that lenders responded to the policy primarily by rationing credit. Finally, while the policy succeeded in reducing leverage, our estimates suggest this effect would have only slightly reduced aggregate default rates during the housing crisis.

(updated 11/2017)

I use variation across counties to study if credit supply to households affected employment in the Great Recession. First, I provide a structural foundation for shift-share credit supply shocks and argue direct estimates may be biased. Exploiting exposure to specific lenders as instrumental variables for the shock, I find declines in household credit had large effects. A one standard deviation decline reduced employment by 3 percent, and the flows of home purchase and refinance credit by 7 and 20 percent, implying the household credit channel accounts for at least 20 percent of aggregate employment losses.

Does Greater Inequality Lead to More Household Borrowing? New Evidence from Household Data
(updated 2/2016)

We combine household data on debt during 2001-2012, regional variation in inequality, and a novel imputation procedure to show that low-income households in high-inequality regions accumulated less debt relative to income than similar households in lower-inequality regions. These results are robust across subsamples and within debt categories, with the strongest effects in mortgage debt. To determine if these quantity movements are driven by supply or demand we examine measures of credit cost and access with data on individual mortgage applications. We find that as inequality increases, low-income households are more likely to be denied credit, more likely to be charged a high interest rate, have to travel further to lender branches, and are less likely to have a new branch opened in their neighborhood. We argue that these patterns are consistent with local inequality differentially affecting the supply of credit to low- and high-income households. We propose a simple model to rationalize these findings that hinges on lenders using a household’s relative position in the local income distribution to infer the underlying quality of applicants. Higher inequality allows lenders to more easily discern borrower quality and so channel relatively more credit toward higher-income applicants. These results highlight a novel channel through which changes in inequality can have significant and differential economic effects on household leverage.

Work in Progress

The Housing Crisis and the Rise in Student Loans 
(draft coming soon)

We study if the changes in U.S. house prices over the 2000s affected growth in student loans. Using household-level panel survey data, we find that as home prices fall households depend less on home equity extraction to finance college enrollment and depend more on student loans. We estimate that for every lost dollar of home equity credit that would have been used to finance college enrollment, households increase student loan debt by forty to sixty cents. This substitution appears to be driven primarily by households with low levels of liquid assets. We extend our analysis with credit bureau data to trace longer-run effects of this leverage on students. Our results show that the decline in house prices reduced households’ ability to finance college enrollment with home equity credit, but that constrained households mostly responded by continuing to enroll in college and relying on student loans. Our estimates suggests the 30%
fall in house prices from the 2006 peak resulted in the average college student borrowing an additional $1,300 in student loans, with some evidence of larger effects on liquidity-constrained and less-educated households.

No Job, No Money, No Refi: Frictions to Refinancing in a Recession
(draft coming soon)
Frictions that prevent households from being able to refinance their mortgages during a recession have the potential to significantly inhibit the efficacy of monetary policy. In this paper, we study the role of two important and counter-cyclical refinancing frictions: the need to document employment and the need to pay upfront, out-of-pocket closing costs. To quantify the effect of these frictions on refinancing, we exploit a sharp policy change introduced by the Federal Housing Administration (FHA) during the Great Recession that eliminated the ability for unemployed borrowers to refinance and prevented many other borrowers from being able to roll closing costs into their mortgage. We find that this policy change had very large effects on FHA borrowers, reducing the monthly probability of refinancing by 0.4 percentage point, or about 50 percent of the pre-shock average. Using variation in the likelihood a borrower is unemployed, we estimate that increasing the unemployment rate by three percentage points reduced refinancing rates by over 0.1 percentage point, implying a high latent demand for refinancing among the unemployed. We also find that being forced to pay closing costs upfront caused borrowers to cut monthly refinancing rates by about 0.4 percentage point. These results suggest that the pass-through of monetary policy to households may be substantially muted by these frictions, especially when unemployment is high and liquidity is low. 

Default and Deleveraging in the Business Cycle

Sources of Heterogeneity in Retail Price-Setting Behavior 
with Bulat Gafarov, Daniel Greenwald, and Leonid Ogrel