Research

This paper studies how asymmetric information in bank lending relationships shapes credit allocation and the aggregate response to shocks. I develop a novel directed search model with long-term lending contracts in which firms privately know their types and banks offer state-contingent contracts that screen borrowers. When banks imperfectly learn about borrower types, incentive constraints distort equilibrium interest rates and reduce market tightness, limiting credit supply for good firms. The model shows that these informational distortions are more pronounced in good times, slowing down recovery. The model also predicts that lending terms improve with relationship tenure as banks accumulate information about borrowers. 

This paper studies monetary non-neutrality with multi-product firms that face information frictions in a Rational Inattention framework. I expand a standard menu-cost with information friction in Woodford (2009) to a multi-product setting and compare the effect of monetary contraction in a single product vs two product economy. In the preferred calibration, I show that monetary policy shocks in a two-product economy yield a lower monetary non-neutrality than in a single-product. I highlight how economies of scope in price setting and decreasing selection effect work in an opposite direction in affecting non-neutrality.