Recent updates:

• New paper alert:  Identifying Relationship-level Effects Using Covariance Restrictions   (UPDATE APRIL 2026) 

in which we (with Daniel Lewis) propose a new model in which relationship-specific effects or shocks are identified in a bipartite network under mild covariance restrictionn. For example, separate demand shocks are identified for each bank from which a firm borrows. .We show that a simple estimator is consistent, derive its limiting distribution, and illustrate its performance in simulations. We document considerable bias in Abowd et al. (1999) style estimates and associated regressions, while finding significant deleterious effects of the post-2022 monetary contraction on exposed firms. We highlight novel heterogeneity in the transmission of monetary policy.

CODE: A Python script to implement the decomposition is available