Research
Working Papers:
Cryptocurrency Investing: Stimulus Checks and Inflation Expectations (with Darren Aiello, Tetyana Balyuk, Marco Di Maggio, Mark Johnson, and Jason Kotter) Revise & Resubmit, Review of Financial Studies
Abstract: We provide a first look into the factors that affect retail investing in cryptocurrencies. We use consumer transaction data to examine how household characteristics, liquidity shocks, and hedging requirements shape the crypto investment decisions of millions of U.S. households. We find that—similar to traditional investing—crypto investing responds to wealth, risk attitudes, and liquidity constraints. Yet, crypto investing is more responsive than after-tax traditional investment flows to overall market conditions. We then show that investors' budget constraints affect crypto investing, in line with portfolio choice theories. We find that relaxing budget constraints through receiving stimulus payments increases crypto investing. Tighter future budget constraints due to higher expected inflation also increase crypto investing, consistent with hedging motives. Our findings are important for understanding this new high-risk, high-return asset class and designing effective regulations in this rapidly evolving space.Policy News and Stock Market Volatility (with Nicholas Bloom, Steve Davis, and Kyle Kost) (Data) Revise & Resubmit, Journal of Financial Economics
Abstract: We exploit the text in newspapers and 10-K filings to quantify the drivers of aggregate and firm-level stock market volatility. We first create a newspaper-based Equity Market Volatility (EMV) tracker that moves closely with the VIX and the volatility of returns on the S&P 500. Parsing the underlying text, we then construct forty category-specific EMV trackers. News about commodity markets, interest rates, real estate markets, aggregate activity and inflation figure prominently in EMV articles, with large category-specific variation over time. Policy news is another major source of market volatility: 30 percent of EMV articles discuss tax policy, 30 percent discuss monetary policy, and 25 percent refer to some form of regulation. Trade policy news went from a virtual nonfactor in market volatility to a leading source after U.S.-China trade tensions escalated. Next, we use 10-K filings to quantify firm-level exposures to the same forty risk categories. Combining our newspaper-based measures with our textual analysis of 10-K filings, we obtain monthly firm-level risk exposure measures. Finally, we show that these measures are highly statistically significant in explaining the firm-level structure of realized equity market volatilities at the monthly frequency, even after conditioning on firm effects, time effects and industry-time effects.What Triggers Stock Market Jumps? (with Nicholas Bloom, Steve Davis, and Marco Sammon) (Data)
Abstract: Based on readings of next-day newspaper articles, we catalog the proximate cause and geographic source of all largest 1% of daily stock market movements in 14 countries over the past 30 years. Our catalog extends back to 1930 for the United Kingdom and to 1900 for the United States. Using the United States as a test case, we compare categorizations across several newspapers and human coders, obtaining consistent results. News about the United States plays a disproportionate role in triggering large equity moves around the world in recent decades, relative to the U.S. share of world output. The reverse pattern, of large U.S. equity moves in response to foreign news, is comparatively rare. Across almost all countries, the share of large stock market moves associated with government policy increased during and after the Global Financial Crisis of 2008-09. We show that shocks of different types and geographic origins are associated with significant differences in returns and both implied and realized volatility.Correlation in State and Local Tax Changes (with Pawel Janas and Lorenz Kueng) (State Tax Data; County Tax Data) Reject & Resubmit, Journal of Public Economics
Abstract: We develop a comprehensive dataset of state and local taxes from 2000-2015 that includes personal income taxes, property taxes, corporate income taxes, sales taxes, estate taxes and excise taxes. We illustrate how state and local taxes have changed over time, over business cycles, and to what extent different taxes co-move within a state or locality. We observe large differences in the mix of taxes across states and local jurisdictions and note that these differences have become more pronounced over time. Moreover, we find that taxes of different types tend to co-move within a jurisdiction, highlighting the importance for researchers to take into account the entirety of the tax system, rather than just a single tax type, when examining responses to tax changes. At both a state and local level, increases in tax rates of all types are associated with increased tax revenue but worsened business conditions and employment.The Determinants of The Chinese Household Savings Rate (with Efraim Benmelech, Zhishu Yang, and Jacky Zhang)
Abstract: China’s high household savings rate has attracted great academic interest but remains a puzzle. Potential explanations include demographics, policy actions, and financial causes. However, a lack of reliable microlevel data makes it difficult to assess the relative importance of each factor. This paper provides new answers to this question by using income and spending data from two large Chinese banks alongside linkages to demographic characteristics and administrative records covering marriage and births. Our results suggest that income growth, financial instability, and credit access, rather than such directives as the one-child policy, are the primary causes of high saving rates among Chinese households.Corporate Taxes and Retail Prices (with Stephen Sun and Constantine Yannelis)
Abstract: Higher corporate taxes must result in lower payments to shareholders, lower wages, or higher product prices. We study the impact of corporate taxes on barcode-level product prices using linked survey and firm-level data. Our empirical strategy exploits the dichotomy between the location of production and the location of sales, providing estimates free from confounding local demand shocks. We find significant effects of corporate taxes on prices with a net-of-tax elasticity of 0.24. We find null effects on prices for firms subject to personal income taxes. In excess of 40% of corporate tax incidence may fall on consumers, suggesting that models used by policymakers significantly underestimate the incidence of corporate taxes on consumers. Pass-through is larger for products purchased by high-income households, higher priced goods, and in less competitive markets.Effects of Cryptocurrency Wealth on Household Consumption and Investment (with Darren Aiello, Tetyana Balyuk, Marco Di Maggio, Mark Johnson, and Jason Kotter)
Abstract: This paper uses transaction-level data across millions of accounts to identify cryptocurrency investors and evaluate how fluctuations in individual crypto wealth affect household consumption, equity investment, and local real estate markets. We estimate an MPC out of unrealized crypto gains that is more than double the MPC out of unrealized equity gains but smaller than the MPC from exogenous cash flow shocks. This MPC is mostly driven by increases in cash/check spending and mortgages. Moreover, households sell crypto to increase both discretionary as well as housing spending. As a result, crypto wealth causes house price appreciation—counties with higher crypto wealth see higher growth in home values following high crypto returns. Our results indicate that cryptocurrencies have substantial spillover effects on the real economy through consumption and investment into other asset classes.Work in Progress:
"Household Consumption While Working from Home" with Nicholas Bloom, Stephanie Johnson and Jana Obradovic
"Payroll Tax Deferrals as Minimal Ricardian Equivalence" with Adam Isen and Constantine Yannelis
"Anticipatory Non-Spending" with Michael Gelman, Lorenz Kueng and Seung Lee
Published and Forthcoming Work:
"Using Disasters to Estimate the Impact of Uncertainty" (with Nicholas Bloom and Stephen Terry) (Data & Replication; Appendix) Review of Economic Studies, Volume 91, Issue 2, March 2024, Pages 720–747
"Financial Returns to Household Inventory Management" (with Lorenz Kueng and Stephanie Johnson) Journal of Financial Economics (Editor's Choice), Volume 151, January 2024
"Income, Liquidity, and the Consumption Response to the 2020 Economic Stimulus Payments" (with RA Farrokhnia, Steffen Meyer, Michaela Pagel, and Constantine Yannelis) Review of Finance, Volume 27, Issue 6, November 2023, Pages 2271–2304
"Customer Churn and Intangible Capital" (with Brian Baugh and Marco Sammon) (Firm Level Data) Journal of Political Economy: Macroeconomics, Vol 1, No. 3, 2023
Note: A previous version of this paper was titled: "Measuring Customer Churn and Interconnectedness""State-Level Economic Policy Uncertainty" (with Steve Davis and Jeffrey Levy) (Data) Journal of Monetary Economics , Vol 132, November 2022
"Consumption Imputation Errors in Administrative Data" (with Lorenz Kueng, Steffen Meyer, and Michaela Pagel) Review of Financial Studies, Vol 35, Issue 6, June 2022, Pages 3021–3059
"Income Fluctuations and Firm Choice" (with Brian Baugh and Lorenz Kueng) Journal of Financial and Quantitative Analysis Volume 56, Issue 6, 2021
"Shopping for Lower Sales Tax Rates" (with Lorenz Kueng and Stephanie Johnson) AEJ: Macroeconomics, July 2021 Vol 13 No. 3, pp. 209-50 (Online Appendix; Sales Tax Data)
"The Unprecedented Stock Market Reaction to COVID-19" (with Nicholas Bloom, Steven J. Davis, Kyle Kost, Marco Sammon, and Tasaneeya Viratyosin), Review of Asset Pricing Studies, December 2020 Vol. 10 (4), pp. 742-758
"How Does Household Spending Respond to an Epidemic? Consumption During the 2020 COVID-19 Pandemic" (with RA Farrokhnia, Steffen Meyer, Michaela Pagel, and Constantine Yannelis), Review of Asset Pricing Studies, December 2020 Vol. 10 (4), pp. 834–862
"Economic Uncertainty Before and During the COVID-19 Pandemic" (with Dave Altig, Jose Maria Barrero, Nicholas Bloom, Phil Bunn, Scarlet Chen, Steven J. Davis, Julia Leather, Brent Meyer, Emil Mihaylov, Paul Mizen, Nick Parker, Thomas Renault, Pawel Smietanka and Greg Thwaites), Journal of Public Economics, Vol 191, Sept 2020
"Expectation Formation Following Large Unexpected Shocks" (with Xuguang Sheng and Tucker McElroy) Review of Economics and Statistics May 2020, Vol. 102, No. 2, pp. 287–303
"Debt and the Response to Household Income Shocks: Validation and Application of Linked Financial Account Data" Journal of Political Economy 126, No. 4, 1504-1557, August 2018.
"The Impact of Unemployment Insurance on Job Search: Evidence from Google Search Data" (with Andrey Fradkin) Review of Economics and Statistics, December 2017; 99:5, 756-768. (Data) (Code)
"Income Changes and Consumption: Evidence from the 2013 Federal Government Shutdown" (with Constantine Yannelis) Review of Economic Dynamics, January 2017; 23, 99-124. (Data)
"Measuring Economic Policy Uncertainty" (with Nicholas Bloom and Steve Davis) Quarterly Journal of Economics (Lead Article), November 2016; 131:4, 1593-1636. (Website; Figures; Data)
Lightly Refereed Work:
"Household Financial Transaction Data" (with Lorenz Kueng), Annual Review of Economics, August 2022 , Vol. 14, pp. 47-67
"Do Household Finances Constrain Unconventional Fiscal Policy?" (with Lorenz Kueng, Brian Melzer, and Leslie McGranahan) NBER Tax Policy and the Economy Vol. 33 (1), 1-32, November 2018.
"Effects of Immigrant Legalization on Crime" American Economic Review P&P, 105(5): 210-13. 2015. (Immigration Tape Data)
"Why Has US Policy Uncertainty Risen since 1960?" (with Nicholas Bloom, Brandice Canes-Wrone, Steven J. Davis, and Jonathan Rodden) American Economic Review P&P, 104(5): 56-60, 2014.
Shorter Writings and Policy Pieces:
"Policy Uncertainty at the State Level" with Steve Davis and Jeffrey Levy) CEPR Vox
“Twitter-Derived Measures of Economic Uncertainty,” with Nicholas Bloom, Steve Davis, and Thomas Renault. Data.
"COVID-Induced Economic Uncertainty" with Nick Bloom, Steve Davis, and Stephen Terry. NBER Working Paper
"The Unprecedented Stock Market Reaction to COVID-19" with Nicholas Bloom, Steven J. Davis, Kyle Kost, Marco Sammon, and Tasaneeya Viratyosin. Covid Economics: Vetted and Real-Time Papers, Issue 1, 3 April 2020
“Elections, Political Polarization, and Economic Uncertainty,” with Aniket Baksy, Nicholas Bloom, Steve Davis, and Jonathan Rodden
"Polarised elections raise economic uncertainty" with Aniket Baksy, Nicholas Bloom, Steve Davis, and Jonathan Rodden. CEPR Vox
"The interaction of household finances and unconventional fiscal policy" with Lorenz Kueng, Brian Melzer, and Leslie McGranahan. CEPR Vox
"How did household balance sheets affect consumption during the Great Recession?" CEPR Vox
"Did the 2013 Government Shutdown Severely Damage the U.S. Economy?" with Constantine Yannelis. SIEPR Policy Brief
"Immigration fears and policy uncertainty" with Nicholas Bloom and Steve Davis. CEPR Vox
"Policy uncertainty and the stalled recovery" with Nicholas Bloom and Steve Davis. CEPR Vox
"Falling policy uncertainty is igniting the US recovery" with Nicholas Bloom and Steve Davis CEPR Vox
"Economic recovery and policy uncertainty in the US" with Nicholas Bloom, Steve Davis and John Van Reenen. CEPR Vox
"Has Economic Policy Uncertainty Hampered the Recovery?" with Nicholas Bloom and Steve Davis. Prepared for a volume edited by Lee E. Ohanian, John B. Taylor and Ian Wright from the Hoover Institution Press.
"Legalization of Undocumented Immigrants Can Reduce Crime" SIEPR Policy Brief
“Economic Policy Uncertainty in China,” with Nicholas Bloom, Steve Davis, and Sophie Wang. January 2013.Data
"The Rocky Balboa recovery" with Nicholas Bloom and Steve Davis. CEPR Vox
"Policy Uncertainty Is Choking Recovery" with Nicholas Bloom and Steve Davis. Bloomberg
"Policy uncertainty: a new indicator" with Nicholas Bloom and Steve Davis. CentrePiece Magazine