Ahmed M.A. ahmed

Publications:

Firms Subjective Political Uncertainty: Survey Evidence of Egypt’s Arab Spring, Applied Economics Letters, 2025.

We provide evidence of firms’ perceived political uncertainty. We exploit a new survey question in the Egyptian Enterprise Survey to develop a representative panel data set of firms’ subjective beliefs, characteristics and performance for the Egyptian private sector. We then document how subjective political uncertainty varies in the time series as well as in the cross section of firms. Our main result is that perception of political uncertainty reflects change. Firms perceive political uncertainty more when they realize change, either good or bad. To explain this empirical result, we present a stylized two-period Bayesian updating model where firms receive signals about the impact of the political uncertainty on their business situations.

Fiscal Stimulus and Pension Contributions: Evidence from the TCJA, with Anna Zabai (UBS), Journal of Pension Economics and Finance, 2025.

We evaluate the impact of the 2017 Tax Cut & Jobs Act (TCJA) pension tax break on sponsor contributions to defined-benefit retirement plans. We exploit cross-sectional variation in ex-ante exposure to the tax break. We find that the tax break induced an extra $2.8 billion of sponsor contributions to medium- and large-scale plans in 2017. However, we find strong evidence of reversal, both in terms of sponsor contributions and plan funding ratios by 2018. Our contributions model indicates that this reversal is consistent with more binding financial constraints in 2018 relative to 2019. Our results suggest that the TCJA did not have a long-lasting impact on corporate defined-benefit pension funds.

Comparing Ask and Transaction Prices in the Swiss Housing Market, with Diego Ardila (ETHZ) and Didier Sornette (ETHZ), Quantitative Finance and Economics, 2021.

We analyze the relationship between ask and transaction prices in the Swiss residential real estate market over the 2005-2015 period. First, we present strong evidence that ask and transaction prices are co-integrated across different market segments, but they do not Granger-cause one another. Second, we analyze the cross-sectional distributions of ask and transaction prices/per living space and conclude that they do not follow the same distribution, with the distribution of transaction prices close to a log normal distribution and the distribution of ask prices exhibiting slightly fatter tails. Finally, we show significant evidence that transaction prices tend to exceed ask prices during protracted booms and bubble regimes. We discuss these empirical patterns in light of theoretical housing search models, and provide support for the hypothesis that the 2005-2015 Swiss market has been dominated by an auction like dynamics. Hence, although ask prices constitute a suitable proxy to follow the development of the Switzerland's real estate market, especially given the sparsity of available transaction data, they might be prone to underestimate the extent of price increases when the market is booming, and the magnitude of the correction when the market enters the bust phase of the housing cycle.

Working Papers:

The Hedging Cost Channel of Monetary Policy Transmission: Evidence from Cross-Border Bond Flows, with Boris Hofmann (BIS) and Martin Schmitz (ECB). BIS Working Papers #1153.

Revise and Resubmit (August 2026), Review of Finance.

This paper uses unique security-level data from euro area investment funds to analyze how foreign investors adjust their portfolios in response to changes in US monetary policy. When US policy tightens, euro area funds, in particular those with FX hedging mandates, respond in two ways: they (1) cut their overall exposure to US dollar bonds and (2) shift their remaining holdings toward higher-yielding, lower-rated securities. These findings are consistent with a conceptual framework for cross-border portfolio allocation in the presence of hedging costs. The mechanism operates through the use of rolling short-term hedging contracts, which erode the hedged yield on US dollar bonds when US rates rise. This hedging channel of monetary transmission stands in sharp contrast to the classical risktaking channel, in which monetary tightening dampens investors’ reach for yield. Finally, we show that the resulting yield-driven purchases by euro area funds with FX hedging mandates have economically meaningful price effects that influence conditions in US dollar credit markets.

Benchmark-Relative Wealth and Risky Asset Allocation, with Oyakhilome Wallace Ibhagui (IFC and Johns Hopkins).

Revise and Resubmit (September 2026), International Review of Financial Analysis.

This paper proposes and tests a model of risky asset allocation under a benchmark-relative regret aversion. Investors derive utility from terminal wealth, but experience regret as it nears a salient benchmark, such as accumulated contributions or reference wealth. The model yields a closed-form optimal risky share where effective risk aversion rises as wealth nears the benchmark, generating endogenous de-risking. When wealth is sufficiently above the benchmark, the policy converges to the classical Merton allocation. The model predicts that investors with larger wealth buffers assume greater financial risk, while those near the benchmark behave more conservatively. Using Survey of Consumer Finances data, we find evidence consistent with the model: households farther above an income-based benchmark allocate more to risky assets and participate more in equity markets, controlling for wealth, income, demographics, and risk tolerance. Results provide a behavioral interpretation for benchmark-sensitive portfolio choice with implications for household finance, lifecycle investing, and pension design.

Funding Stress and the Margins of Commodity-Market Integration: Evidence from the Soybean Crush and the Energy Crack, with Oyakhilome Wallace Ibhagui (IFC and Johns Hopkins).

Revise and Resubmit (July 2026), Journal of Commodity Markets.

Prices in a physically linked commodity complex can be tied together in three distinct ways: in the average processing relation, in the dispersion around that relation, and in short-run co-movement. Constrained arbitrage need not act on all three alike. This paper asks which of those margins moves with financial stress. We study the soybean crush and the 3–2–1 energy crack using weekly futures from 2006 to 2026, and define the structural wedge as a physical processing margin in price levels at engineering transformation weights rather than as an estimated log-price residual. In the model, a higher effective cost of risk bearing widens the equilibrium dislocation generated by a given commercial imbalance and, under a mild condition, raises its conditional dispersion; because the same balance-sheet state is shared across funded books, a funding shock also forces synchronized unwinding and generates a sign-based prediction for co-movement. The speed of error correction is derived rather than assumed, so balance-sheet-independent demand from physical participants places a floor under total adjustment and dampens its proportional sensitivity to stress.

The data show a correspondingly uneven response, and the clearest footprints of constrained arbitrage are in second moments. The conditional dispersion of the crack rises sharply with stress across squared-wedge and conditional-variance specifications, and return correlations rise under stress by more for output–output pairs than for input–output pairs, matching the sign structure of spread unwinding. The soybean processing relation is enforced at exact engineering weights, with meal adjusting significantly toward the board crush in both single-equation and joint-system estimates. Evidence that the speed of that adjustment varies with stress is absent in both: the interaction is correctly signed but insignificant throughout. A joint physical ECM–BEKK-X estimated for each complex reaches the same conclusion on the mean while placing stress directly in the conditional covariance, where the estimated stress loading is positive in both complexes. Formal joint-system inference is cleanest for energy; the soybean covariance estimate is treated as supportive because its covariance recursion lies near the stability boundary. Direct funding proxies are mixed once the VIX and commodity realized volatility are controlled for, so the baseline results are interpreted as reduced-form stress effects rather than isolated funding-cost estimates.

Pension De risking and Treasury Yield Curve Flattening, with Hui Chen (MIT).

We provide causal evidence that pension funding status drives maturity-specific portfolio reallocation with material effects on Treasury yields and yield curve shape. Exploiting the Tax Cuts and Jobs Act of 2017 as a natural experiment, we show that improvements in pension funding triggered concentrated demand for ultra-long (25–30 year) Treasury STRIPS, accompanied by exits from shorter and intermediate maturities. Pension funds absorbed $41 billion of ultra-long Treasuries, generating a pronounced flattening of the yield curve. Using instrumental variables, we find that pension demand accounts for nearly all the 52-basis point compression in the 30–10-year term spread and 155 basis points of the compression in the 30–2 spread during this period. Plan-level evidence confirms the mechanism: a 10-percentage point increase in funding raises safe-asset allocations by 1.4 percentage points, with discrete increases around the 95% funding threshold where regulatory and risk-management incentives intensify. Unlike prior work focused on falling-rate environments, we document pension de-risking in a rising-rate context, showing that institutional demand can amplify yield curve flattening and contribute to inversion even absent deteriorating fundamentals. These findings provide direct support for preferred-habitat theories and highlight how coordinated institutional rebalancing affects monetary policy transmission in deep Treasury markets.

When Dollar Strength Stops Widening the Basis: Regime-Dependent Hedging in the JPY–USD Swap Market, with Oyakhilome Wallace Ibhagui (IFC and Johns Hopkins).

We show that the response of the JPY–USD cross-currency basis to U.S. dollar shocks is strongly state dependent and closely tied to the hedging behavior of Japanese holders of U.S. assets. In low-dollar regimes, unexpected dollar appreciations lead to persistent basis widening, while in high-dollar regimes the response attenuates or reverses. We develop a model in which the cross-currency basis reflects the price of net currency-hedging demand in the presence of intermediary balance sheet constraints. The key mechanism is regime-dependent asset-side hedging: when the dollar is weak, Japanese investors increase FX hedging of their large USD bond portfolios following dollar appreciations, generating sustained demand for dollar funding in swap markets; when the dollar is already strong, hedging demand responds far less. Empirically, we show that the regime asymmetry is amplified when proxies for intermediary constraints tighten, particularly at maturities associated with Japanese institutional investors. These results indicate that nonlinear basis dynamics reflect state-dependent institutional hedging flows rather than funding stress alone and highlight the central role of Japanese portfolio rebalancing in the international transmission of dollar shocks.

Hedging Demand and Forward Pricing Under Intermediary Constraints, with Oyakhilome Wallace Ibhagui (IFC and Johns Hopkins).

We propose a hedging-demand channel jointly determining foreign asset holdings, currency hedging, and forward pricing under intermediary balance-sheet constraints. A risk-averse investor chooses positions and hedge ratios while intermediaries supply forward contracts subject to convex costs, generating an endogenous feedback loop: larger positions raise hedging demand, worsening forward quotes, which feeds back into portfolio choice. Forward pricing wedges thus reflect endogenous investor behavior and intermediary constraints. Using G10 panel data, we show that yield differentials, a structural determinant of hedging demand, drive basis spread movements, with constraints amplifying this effect in a maturity-dependent pattern confirmed across three independent identification strategies.

Work in Progress:

• Pension Funds Liquidity Management and Private Equity Investments, with Victoria Ivashina (Harvard).

• Reverse Yankee and Hedging Costs, with Martin Bretschneider (USI Lugano), Boris Hofmann (BIS) and, Martin Schmitz (ECB).

• Estimating the Social Costs of Debtor Prisons, with Kareem Haggag (UCLA), Abdelrahman Nagy (Sawiris Foundation), and Adam Osman (UIUC).
  Supported by grants from Fund for Innovation in Development (€1.5M) and JPAL MENA/Egypt Impact Lab ($74K).

• Benchmark Duration Under QT: Treasury Maturity Shortening and Federal Reserve Portfolio Concentration, with Jérôme Taillard (Babson College).

• Inflation Composition and Stock-Bond Correlation: Theory and Cross-Country Evidence, with Oyakhilome Wallace Ibhagui (IFC and Johns Hopkins) and Minqi Shu (Johns Hopkins).

• Credit without Banks: Lending through a Digital Commerce Platform, with Leonardo Gambacorta (BIS) and Andrea Presbitero (IMF).