"A Macroeconomic Model with Concentrated Leverage" (First Draft)

I introduce persistent heterogeneity and history dependence into the financial sector of the canonical macroeconomic framework of Gertler and Kiyotaki (2010). Financial intermediaries are subject to market incompleteness and uninsurable capital income shocks à la Benhabib, Bisin, and Zhu (2011). Idiosyncratic risk creates a bank net worth fluctuation problem analogous to the Aiyagari-Huggett- Krusell-Smith environment. In combination with occasionally binding leverage constraints, the risk generates a non-linear precautinary risk-taking motive: relative to the median intermediary, big banks enjoy greater leverage, returns, and valuations. In good times, profitable intermediaries push down risk premia, inflate asset prices, stimulate investment, consumption, and output. But this success story is achieved at the expense of those banks absorbing most of aggregate risk in highly leveraged balance sheets. In bad times, the first three moments of the dynamic distribution of leverage rise, and the once very profitable intermediaries experience greater losses and leverage spikes. Quantitatively, these non-linearities can almost double the sen- sitivity of aggregate net worth, investment, and asset prices to negative aggregate shocks. As a result, risk premia jump by 5,000 basis points.

Old (pre-PhD)

"Neo-Transitional Economics" (Co-edited with Dr. Yusaf Akbar), Emerald Publishing, 2015. Book link

"Interest Rate Pass-Through and Monetary Policy Asymmetry: a Journey into the Caucasian Black Box,” Journal of Asian Economics (2014) (With Balazs Egert) Article Link

“Capital Mobility in the Caucasus,” Economic Systems (2013) Article Link

“J-Curve Dynamics and the Marshall Lerner Condition: Evidence from Azerbaijan,” Transition Studies Review (2013) Article Link