Christian T. Jauregui
I am a financial economist focusing on research in macroeconomics, corporate finance, international finance, and empirical asset pricing.
My ongoing research studies the economic relationship between publicly-listed, U.S. firms' pricing behaviors in product markets and their issuances of both bank loans and corporate bonds. Another vein of my work studies the international effects of U.S. monetary policy. Using high-frequency data for a large set of asset prices, I take a "big data" approach in mapping high-frequency movements in financial markets around U.S. monetary policy announcements, to low-frequency movements in the real economies of neighboring countries.
Before coming to UC Berkeley, I worked full-time at the Federal Reserve Bank of New York in the Macroeconomic and Monetary Studies Function. I completed my Bachelor of Science in Mathematics and Economics at UCLA.
Job Market Paper:
Variable Markup Implications of Corporate Debt Structure
Bank loans and market debt are the most vital sources of financing for public U.S. firms, yet their effect on variable (price-cost) markups is largely unknown. This paper documents the hump-shaped relationship between a firm’s variable markup, and its share of market debt in total debt financing. On average, markups rise with market debt shares, peaking at a share of 61–67% before declining. I demonstrate this novel finding with a quantitative model of firm dynamics in a monopolistically competitive economy. While firms set variable markups in a customer market, they trade off restructurable bank loans for marginally cheaper, non-restructurable market debt. Market debt contracts reduce flexibility in cash flows, increasing a firm's incentive to raise today's operating profits by setting a higher markup. The trade–off between current and future profits implies the benefits of a high markup are maximized at a market debt share beyond which markup reductions are required to attract new customers. My model replicates the hump shape while matching several key, cross-sectional and aggregate features of the data. In response to a bank credit crunch, akin to that of the 2008–09 financial crisis, my model predicts a significant shift into market debt. Simultaneously, the benefit of raising markups to offset an increased reliance on market debt grows, consistent with observed behaviors. My model accounts for almost 75% of the decline in total sales by public U.S. corporations following the credit crisis.
International Monetary Spillovers: A High-Frequency Approach (with Ganesh Viswanath Natraj)
This paper examines the international effects of monetary policy. Much has been written on the domestic effects of the U.S. Federal Reserve's actions, but what about its effects across borders? In this paper, we document the international spillovers of major central banks policies' through their indirect effect on a set of base asset prices, by using high-frequency identification of monetary policy announcements. We implement a gross domestic product (GDP)-tracking approach to identify real spillovers of monetary policy, by mimicking real GDP news based on our asset returns around monetary announcements. This reflects news regarding real GDP growth due to monetary policy. Most importantly, this provides us a direction of causation from monetary announcements to real variables through their indirect effects on asset prices. In response to positive, domestic monetary shocks, real GDP-tracking news becomes negative for Australia, Canada, and the United States. Our methodology indicates significant spillovers of U.S. monetary policy to asset prices in periphery countries, such as Australia and Canada, with a U.S. monetary contraction leading to a decrease in both of these countries' real GDP-tracking news.
(Summary: Draft available upon request)
Work in Progress:
1. Equity Trading Behaviors and Macroeconomic News (with Yuriy Gorodnichenko)
Dynamic interactions between both retail and institutional investors' trading behaviors in U.S. equity markets is an interesting area of academic research generally unexplored. Existing papers present these investors mostly in isolation, ignoring both their short- and long-run effects on one another. We study the impact of institutional trades on retail trading behaviors, by looking at the dynamic responses of retail order imbalances to “impulses” in institutional order flows. Under the identifying assumption that retail investors contemporaneously respond to institutional order flows, and not vice versa, we find significant evidence linking a strong, negative response in retail behaviors to a positive impulse in institutional order flows. We also find evidence of retail investors reacting to institutional trades, following both macroeconomic news releases and U.S. FOMC announcements. This has implications for a "microstructure" monetary transmission mechanism.
2. Bank Capital and Monetary Policy Shocks (with Mykyta Bilyi)
What could monetary policy shocks tell us about optimal bank capital requirements? We find news following U.S. FOMC announcements can be viewed as quasi-natural "stress-tests" impacting U.S. banks depending on their equity capital ratios. The heterogeneous response of banks’ equity returns and bond yields to surprises in interest rates reveal how financial markets favorably value excess equity capital. We show the equity return of a bank in the 75th percentile of total equity capital ratio is roughly 1/6 less sensitive to monetary policy shocks than a bank in the 25th percentile. Similarly, corporate bond yields of banks with larger equity capital ratios are better insulated against unexpected changes in the “slope,” or rate of change, of monetary policy. We conclude that higher capital requirements are viewed positively by market participants.
3. Intermediary Asset Pricing and Monetary Policy