Johannes Poeschl
I am a quantitative macroeconomist at the Research Department of the Danish Central Bank.
CV
See here (PDF).
Contact Information
Research Unit, Economics and Monetary Policy Department
Danmarks Nationalbank
Langelinie Allé 47
2100 Copenhagen, Denmark
jpo <at> nationalbanken <dot> dk
Research Areas
Primary: macroeconomics
Secondary: corporate finance, household finance
[Google Scholar] [IDEAS] [SSRN]
News
2023/03/31 - new draft and new title for Noisy credit cycles
2023/09/12 - new draft for Sovereign credit risk, monetary policy, and the role of financial intermediaries
2023/03/31 - new draft for When credit expansions become troublesome: The story of investor sentiments
2022/12/16 - new draft for The macroeconomic effects of shadow banking panics
2022/10/28 - new draft for Banking panic risk and macroeconomic uncertainty
Publications
Banking panic risk and macroeconomic uncertainty, with Jakob Guldbæk Mikkelsen
Journal of Money, Credit & Banking, 2024
We explore the interactions between banking panics and uncertainty shocks. To do so, we build a model of a production economy with a banking sector. In the model, financial constraints of banks can lead to disastrous banking panics. We find that a higher probability of a banking panic increases macroeconomic uncertainty. Vice versa, a shock to macroeconomic uncertainty increases the likelihood of a banking panic. This banking panic channel amplifies the macroeconomic effects of uncertainty shocks. A counter-cyclical capital buffer increases welfare by reducing the likelihood of a banking panic.
The business cycle dynamics of firms' debt maturity vary across the firm size distribution. Small and medium-sized firms have a more pro-cyclical debt maturity than large firms. This paper explores the determinants of firms' debt maturity, and the importance of firms' debt maturity for their investment and leverage dynamics. To do so, it embeds a maturity choice in a model of firm investment and financing. Firms shorten debt maturity during times when default risk premiums are high and their internal funds are scarce. This behavior is consistent with both the life cycle and business cycle dynamics of firms' debt maturity. Endogenous debt maturity helps firms to deleverage faster in response to negative shocks.
We study the interaction between occasionally binding financial constraints in the traditional (retail) banking sector and banking panics in the shadow banking sector. Shadow banking panics occur when retail banks choose not to roll over their lending to shadow banks. Occasionally binding financial constraints of retail banks increase the likelihood of and amplify boom-bust dynamics around such shadow banking panics. The model can quantitatively match the dynamics of key macroeconomic and financial variables around the US financial crisis. We quantify the impact of wholesale funding market interventions akin to those implemented by the Federal Reserve in 2008, finding that they reduced the fall in output by about half a percentage point. The timing of this intervention matters: an intervention before the banking panic would have been more effective and might even have avoided the panic.
Working Papers
Sovereign credit risk, monetary policy, and the role of financial intermediaries, with Ivan Shaliastovich and Ram Yamarthy
Using sovereign credit default swap (CDS) data, we show that U.S. monetary policy shocks have a significant and persistent effect on sovereign credit risk. A 25 basis point surprise in the two-year interest rate is associated with a 6.7 b.p. increase in sdropbpreads, lasting over 30 days on average. The mean estimate masks significant heterogeneity in the cross section and variation in response over time. A one standard deviation increase in a country's ex-ante risk, measured by its prior CDS level, CDS beta with respect to a world index, or political risk, increases the sovereign spread response to a U.S. interest rate shock by an additional 4.5 to 7.3 b.p. The magnitudes are further affected by the health of large financial institutions. A one standard deviation drop in the net worth of global intermediaries, particularly broker-dealers, doubles interest rate pass through. We develop an economic model of foreign investors, global intermediaries, and heterogeneous sovereigns to rationalize these findings. The model suggests that the degree of intermediary constraints directly impacts equilibrium, sovereign credit spreads and the monetary pass through.
Noisy credit cycles, with Eddie Gerba and Danilo Leiva-León
A previous draft of this paper circulated under the title When credit expansions become troublesome: The story of investor sentiments
Identifying the drivers of credit cycles is crucial for prudential regulation. We show in a model that noise shocks result in excessive asset price movements, leading to sharp credit reversals. Motivated by this, we decompose fluctuations in stock prices into fundamental and noise shocks and estimate their effects on credit. Both shocks lead to a credit expansion, but only a noise shock results in a reversal if the anticipated shock fails to realise. Noise shocks have stronger effects when risk premiums are low. A novel debt overhang channel is important for the propagation of noise shocks.
Recent crises have emphasized the tail risks present in corporate credit markets. Using credit default swap (CDS) data across maturities, we document two patterns. First, while the CDS term structure is generally upward sloping, financially constrained firms exhibit a negative slope. Second, shorter-term spreads display greater sensitivity to aggregate risk, a pattern driven by the expected loss component. To understand these findings, we construct a dynamic model of firm behavior where corporations finance investment using short and long-term debt. The model suggests that dis-investment by constrained firms amplifies stress and plays an important role in term structure dynamics.
Work in Progress
The consumption effects of household financial distress, with Florian Exler
Solving endogenous default models: A Taylor projection approach, with Oskar Arnt Juul
Policy Work
Since this is my personal homepage, any views expressed here are of course my own.