Email: robert.j.kurtzman@frb.gov

Working Papers:

Abstract: This paper examines the potential misallocation of resources induced by central bank large-scale asset purchases, particularly the purchase of corporate bonds of nonfinancial firms, through their heterogeneous effect on firms' cost of capital. First, we analytically demonstrate the mechanism in a static model with heterogeneous agents. We then evaluate the misallocation of resources induced by corporate bond buys and the associated output losses in a calibrated DSGE model of which Gertler and Karadi (2013) is a special case. The calibrated model suggests misallocation effects from corporate bond buys can be large enough to make corporate bond buys less effective than government bond buys, which is not the case without accounting for misallocation effects.

Abstract: Using confidential loan officer survey data on lending standards and internal risk ratings on loans, we document an effect of large-scale asset purchase programs (LSAPs) on lending standards and risk-taking. We exploit cross-sectional variation in banks’ holdings of mortgage-backed securities to show that the first and third round of quantitative easing (QE1 and QE3) significantly lowered lending standards and increased loan risk characteristics. The magnitude of the effects is about the same in QE1 and QE3, and is comparable to the effect of a one percentage point decrease in the Fed funds target rate during times of conventional monetary policy.
Abstract: This paper presents accounting decompositions of changes in aggregate labor and capital productivity. Our simplest decomposition breaks changes in an aggregate productivity ratio into two components: A mean component, which captures common changes to firm factor productivity ratios, and a dispersion component, which captures changes in the variance and higher order moments of their distribution. In standard models with heterogeneous firms and frictions to firm input decisions, the dispersion component is a function of changes in the second and higher moments of the log of marginal revenue factor productivities and reflects changes in the extent of distortions to firm factor input allocations across firms. We apply our decomposition to public firm data from the United States and Japan. We find that the mean component is responsible for most of the variation in aggregate productivity over the business cycle, while the dispersion component plays a modest role.

Abstract: What are the gains from resolving debt overhang for firm growth and macroeconomic aggregates? This paper addresses this question through the lens of a general equilibrium model of firm dynamics and endogenous innovation in which debt overhang affects the firm innovation decision and, thus, firm expected subsequent growth. The estimated model implies that while the private gains to a firm from resolving debt overhang can be large if it faces sufficient default risk, the expected gains to firms on average are relatively modest. The social gains to long-run output from resolving debt overhang are smaller, as changes in prices and the aggregate bankruptcy rate act as dampening forces. However, the estimated model suggests the gains from resolving debt overhang over the business cycle can be large, as firm default risk rises significantly during the recession, which implies a significant decrease in firm innovation and subsequent firm growth.


"Poker Player Behavior After Big Wins and Big Losses'' (with Gary Smith and Michael Levere). Management Science. 55.9 (2009): p1547-1555.


1. The views expressed are solely the responsibility of the authors and should not be interpreted as reflecting the views of the Board of Governors of the Federal Reserve System or of anyone else associated with the Federal Reserve System