Research
Working papers
Savings, Efficiency and Bank Runs (with Agnese Leonello, Caterina Mendicino and Davide Porcellacchia, 2022). ECB Working Paper No. 2636. [link]
R&R at Review of Finance
Does the level of deposits matter for bank fragility and efficiency? In a banking model with endogenous bank runs and a consumption-saving decision, we show that the level of deposits has opposite effects on bank fragility depending on the nature of bank runs. In an economy with panic-driven runs, higher deposits make banks less fragile, while the opposite is true when runs are only driven by fundamentals. The effect of deposits is not internalized by depositors. A saving externality arises, leading to excessive fragility and insufficient liquidity provision. The economy features under-saving when runs are panic driven, and over-saving when fundamental driven.
Monetary Policy, Labor Income Redistribution and the Credit Channel: Evidence from Matched Employer-Employee and Credit Registers (with Martina Jasova, Caterina Mendicino, José-Luis Peydró and Dominik Supera, 2021). CEPR Discussion Paper No. 16549. [link] [most updated version]
This paper documents the redistributive effects of monetary policy on labor market outcomes via the credit channel. For identification, we exploit matched administrative datasets in Portugal - employee-employer and credit registers - and monetary policy since the Eurozone creation in 1999. We find that softer monetary policy improves worker labor market outcomes (wages, hours worked and firm employment) more in small and young firms, which are more financially constrained. Within small and young firms, the wage effects accrue to incumbent workers, in line with the back-loaded wage mechanism. Consistent with the capital-skill complementarity mechanism, we document an increase in skill premium and show that financially constrained firms increase both physical and human capital investment by most. Our findings uncover a central role for both the firm-balance sheet and the bank lending channels of the monetary policy transmission to labor income inequality, with state-dependent effects that are substantially stronger during crisis times. Importantly, we do not find any redistributive effects for firms without bank credit.
Awarded the Equitable Growth grant
Media coverage:
The Financial Channels of Labor Rigidities: Evidence from Portugal (with Edoardo M. Acabbi and Alessandro Sforza, 2019). Banco de Portugal Working Paper No. 2019-15. [link] [most updated version]
Submitted
How do credit shocks affect labor market reallocation, firms' exit and other real outcomes? How do labor-market rigidities impact their propagation? To answer these questions, we match administrative data on worker, firms, banks and credit relationships in Portugal, and conduct an event study of the interbank market freeze at the end of 2008. Our results highlight that the credit shock had significant effects on employment dynamics and firms' survival. These findings are entirely driven by the interaction of the credit shock with labor market frictions, determined by rigidities in labor costs and exposure to working-capital financing, which we label "labor-as-leverage" and "labor-as-investment" financial channels. The credit shock explains about 29 percent of the employment loss among large Portuguese firms between 2008 and 2013, and contributes to productivity losses due to increased labor misallocation.
Winner of the Prize on "Poupança e Financiamento da Economia Portuguesa" (Savings and Financing of the Portuguese Economy) awarded by the Office of Strategy and Studies (GEE) of the Portuguese Ministry of Economy and the Portuguese Association of Insurers (APS).
Media coverage:
Banks' Liquidity Management and Financial Fragility (with Luca G. Deidda, 2017). Previously circulating as "Banks' Liquidity Management and Systemic Risk". Banco de Portugal Working Paper No. 2017-13. [link]
How do banks manage liquidity against financial fragility? To answer this question, we study an economy where banks undertake maturity transformation and insure their depositors against idiosyncratic and aggregate shocks. Moreover, strategic complementarities might trigger depositors’ self-fulfilling runs, modeled as "global games". During runs, if depositors' risk aversion is sufficiently high, the banks engage either in liquidity hoarding when the productive asset in portfolio is sufficiently liquid, or in liquidity cushioning when it is sufficiently illiquid. Ex ante, if the probability of the idiosyncratic shock is sufficiently large, banks hold extra precautionary liquidity, and narrow banking is not viable.