Working papers
Working papers
“Deposit Segmentation and Bank Competition: Implications for Monetary Policy” (JMP, working paper)
Abstract: This paper quantifies how segmentation and bank market power in deposit markets shape the transmission of monetary policy. Using rate data differentiated by deposit account size, I document that uninsured rates are higher than insured rates, significant heterogeneity in banks' exposure to these market segments, and incomplete pass-through from policy rates to deposit rates. I develop and estimate a structural model of bank competition with segmented deposit markets by insurance status and spatial competition to understand these patterns and quantify their implications for monetary transmission. I find that uninsured deposits are slightly more elastic than insured deposits, while insured deposits have higher servicing costs. In a counterfactual 10 basis point increase in the federal funds rate, I find that insured deposit outflows are three times larger than uninsured outflows, and pass-through is higher for uninsured rates. Banks substitute toward wholesale funding, contracting lending as monetary policy tightens. Small banks experience larger balance sheet contractions following rate increases, while competitive markets exhibit stronger deposit pass-through. These findings demonstrate that accounting for deposit segmentation is essential for understanding monetary transmission: segmentation amplifies policy effects in competitive markets but dampens transmission in concentrated markets.
“Deposit Zone Pricing in the U.S. Banking Industry” (working paper)
Abstract: This paper examines how U.S. retail banks use zone rating- defining geographic zones with uniform deposit rates- and quantifies the implications for rate dispersion, competition, and bank profitability. I document heterogeneity in zone rating practices across banks: larger banks maintain broader zones covering expansive geographical areas and exhibit higher rate dispersion, while smaller banks employ more sophisticated zone pricing strategies relative to their geographic footprint. To understand the competitive effects of this pricing practice, I estimate a structural model of deposit competition with differentiated banks and zone rating. I develop novel instruments based on tiered zone rating structures to address endogeneity in deposit pricing, exploiting customized zone-level variation. In counterfactual experiments, moving all banks to finer zones raises average deposit rates and rate dispersion but reduces bank variable profits, with particularly large effects for smaller banks. These findings demonstrate that banking's competitive environment limits banks' ability to profit from geographic price discrimination, providing the first empirical evidence that market discrimination can weaken firm profitability if competition is sufficiently intense.
“The Competitive Effects of Bank Mergers: Evidence from the Truist Bank Merger”, with Evan Newell (draft in progress, preliminary)
Abstract: This paper examines the competitive effects of large bank mergers by analyzing the 2019 merger between BB&T and SunTrust, which formed Truist Financial Corporation- the largest U.S. bank consolidation since the financial crisis. We leverage variation in pre-merger branch overlap across counties to examine how the merger affected local market concentration and deposit pricing. We find substantial increases in market concentration in affected counties. Using a difference-in-differences framework, we document that deposit rates at Truist branches declined relative to competitors in overlapping markets. These results demonstrate the importance of accounting for local market power when evaluating large-scale bank mergers and highlight significant costs of consolidation for depositors.
“Impacts and Drivers of Washington State Marijuana Potency”, with Anya Tarascina and Hanna Han (draft in progress)
Abstract: The potency of cannabis products in Washington's market has been increasing over time due to both higher-potency flower and the introduction of concentrates, raising concerns about negative mental health outcomes documented in prior research. This paper investigates whether the potency increase is driven by consumer demand for higher potency products or by producers who may be innovating to create higher potency products at a lower cost, and quantifies the mental health impacts of these changes. Using administrative cannabis transaction data from Washington State's seed-to-sale tracking system (2014-2019), we employ hedonic regressions to analyze how potency affects wholesale and retail prices. At the retail level, we find that the increase in potency is driven by the increased potency of extracts, while at the wholesale level, THC content is strongly capitalized into prices. We also estimate consumer price sensitivity to understand cost pass-through from wholesalers to retailers and consumers. To examine the relationship between product potency and mental health, we link the transaction data to Washington's Behavioral Risk Factor Surveillance System (BRFSS), which surveys residents about cannabis use, self-reported mental health, and residential location, and employ a difference-in-differences design comparing individuals living within a 30-minute drive of recreational dispensaries (using average dispensary THC% as the continuous treatment measure) to those living farther away.
“Risk Aversion, Reservation Utility and Bargaining Power: An Evolutionary Algorithm Approximation of Incentive Contracts”, with Itza Tlaloc Quetzalcoatl Curiel-Cabral and Sonia Di Giannatale, Computational Economics (2022): 1-35
Abstract: In this paper, we analyze the links between the agent’s reservation utility, bargaining power, and risk aversion in terms of their simultaneous effects on the structure of optimal static contracts. We compare the following principal-agent models in the symmetric and asymmetric information environments: the standard approach, which includes a participation constraint, and a multi-objective (MO) optimization approach in which the objective function is a convex combination of the expected utilities of the principal and the agent. The MO model does not include a participation constraint, but it includes a parameter for the agent’s bargaining power. We also study an Evolutionary Algorithm implementation of the static principal-agent model to support and extend our analytical results. We show that the numerical solution approximated by our implementation of an evolutionary algorithm is in line with the analytical solutions mentioned before. That is, for every admissible value of the agent’s reservation utility, there is a corresponding admissible value of the agent’s bargaining parameter, both in the MO approach and the EA implementation.
“Contracting in Teams with Network Technologies”, Centro de Investigación y Docencia Económicas (2020)
“Modeling Deformable Object Cutting for Surgical Simulators”, Universidad de la Habana (2015)