I am a quantitative macroeconomist at the Research Department of the Danish Central Bank.
See here (PDF).
Research Unit, Economics and Monetary Policy Department
Danmarks Nationalbank
Langelinie Allé 47
2100 Copenhagen, Denmark
jpo <at> nationalbanken <dot> dk
Primary: macroeconomics
Secondary: corporate finance, household finance
[Google Scholar] [IDEAS] [SSRN]
2025/02/26 - new draft (V5) for Noisy credit cycles
2025/02/25 - new working paper The effects of a large energy price shock on firm credit
2024/08/09 - new draft (V4) for Noisy credit cycles
2023/10/17 - new draft (V3) 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 (V2) 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
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.
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
We decompose fluctuations in stock prices into news and noise shocks and estimate their effects on corporate credit. Both shocks lead to a credit boom, but only a noise shock results in a credit bust characterized by slow deleveraging and elevated credit spreads. Also, noise shocks have stronger impact when credit spreads are low. Adding defaultable long-term debt to an otherwise standard macroeconomic model with a financial sector allows the model to replicate these empirical findings.
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.
This study investigates how credit to firms responds to an energy price shock by comparing the credit growth of similar firms with different energy intensities before and after the shock triggered by the Russian invasion of Ukraine. Credit growth of energy-intensive firms declined by 8.75 percentage points. A large part of this decline stems from less risky firms drawing less on preexisting credit lines. Interest rate spreads for new loans rose for riskier firms. The results suggest that less risky firms reduced credit demand, whereas banks reduced supply of new loans to riskier firms.
The consumption effects of household financial distress, with Florian Exler
Solving endogenous default models: A Taylor projection approach, with Oskar Arnt Juul
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