"Improving Public Equity Markets? No Pain, No Gain" (Economics Letters, Volume 162, January 2018)
This paper uses an open-economy extension of Angeletos (2007) to study the effects of reducing public equity costs. The experiment is disciplined with firm-level and aggregate data for Ecuador and Chile. Lower equity costs improve aggregates, but entrepreneurs suffer a loss.
"The Private Equity Premium Puzzle Revisited" (American Economic Review 2014 , 104(10))
This paper revisits the results of Moskowitz and Vissing-Jorgensen (2002) on returns to entrepreneurial investments in the United States. Following the authors' methodology and new data from the Survey of Consumer Finances, I find that the " private equity premium puzzle " does not survive the period of high public equity returns in the 1990s. The difference between private and public equity returns is positive and large period-by-period between 1999 and 2007. Whereas in the 2008-2010 period, overlapping with the Great Recession, public and private equities performances are substantially closer. I validate these results in the aggregate data going back to the 1960s.
"House prices, consumption and the role of non-Mortgage debt" (joint with Ben Tomlin, Journal of Banking and Finance, Volume 83, October 2017)
This paper evaluates the strength of the relationship between house prices and consumption, through the use of debt. Whereas the existing literature has largely studied the effects of house prices on homeowner total or mortgage debt, we focus on the non-mortgage component of household borrowing, using Canadian household-level data for 1999–2007. We rely on variation in regional house prices, homeownership status and age to establish the relationship between house prices and non-mortgage debt. Then, using direct information on debt uses, we determine that house price growth was associated with a non-trivial fraction of concurrent aggregate non-housing consumption growth.
"How Do Mortgage Rate Resets Affect Consumer Spending and Debt Repayment? Evidence from Canadian Consumers" (joint with Xiaoqing Zhou) Under Review
We study the causal effect of mortgage rate changes on consumer spending, debt repayment, and defaults during an expansionary and a contractionary monetary policy episode in Canada. Our identification takes advantage of the fact that the interest rates of short-term fixed-rate mortgages (the dominant product in Canada’s mortgage market) have to be reset according to the prevailing market interest rates at predetermined time intervals. Our empirical strategy exploits this exogenous variation in the timing of mortgage rate resets. We find asymmetric responses of consumer durable spending, deleveraging, and defaults. These results can be rationalized by the cash-flow effect in conjunction with changes in consumers’ expectations about future interest rates. Our findings help to understand the responses of the household sector to changes in the interest rate, especially in countries where variable-rate, adjustable-rate, and short-term fixed-rate mortgages are prevalent.
"The effect of Mortgage Rate Resets on Debt: Evidence from TransUnion (Part I)"
Bank of Canada Staff Analytical Note 2020-2
This note studies how decreases in mortgage rates affect the behaviour of borrowers in terms of spending on durale goods and debt repayment.
"Household Borrowing and Spending in Canada" (joints with Jeannine Bailliu and Cesaire Meh)
Bank of Canada Review - Winter 2011-2012
Understanding how much of the increased debt load of Canadian households has been used to finance household spending on consumption and home renovation is important for the conduct of monetary policy. In this article, the authors use a comprehensive data set that provides information on the uses of debt by Canadian households. They first present some facts regarding the evolution of Canadian household debt over the period from 1999 to 2010, emphasizing the increased importance of debt flows that are secured by housing. They then explore how Canadian households have used their borrowed funds over the same period, and assess the role of these borrowed funds in financing total consumption and spending on home renovation. Finally, they examine the possible effects of a decline in house prices on consumption when housing equity is used as collateral against household indebtedness.