Leopold Zessner-Spitzenberg

I am a 5th year PhD student at the Vienna Graduate School of Economics. My field of research is Macroeconomics, where I focus on Finance and International Economics. I will be available for interviews at the European Job Market in Rotterdam in 2019.

Contact Information

Leopold Zessner-Spitzenberg

Vienna Graduate School of Economics

Department of Economics

University of Vienna

Oskar-Morgenstern-Platz 1

1090 Vienna, Austria

Email: leopold.zessner@univie.ac.at

Working Papers

Awarded the 'Young Economist Award 19' 12th FIW Research Conference International Economics

We propose a small open economy model where agents borrow internationally and invest in liquid foreign assets to insure against liquidity shocks, which temporarily shut out the economy of short-term credit markets. Due to the presence of a pecuniary externality individual agents borrow too much and hold too little liquid assets relative to a social planner. This inefficiency rationalizes macroprudential policy interventions in the form of reserve accumulation at the central bank coupled with a tax on foreign borrowing. Unless combined with other measures, a tax on foreign borrowing is detrimental to welfare; it reduces agents' incentives to invest in liquid assets and thereby increases financial instability. Our model can quantitatively match the simultaneous depreciation of the exchange rate and contractions in output, gross trade flows, foreign liabilities and liquid reserves during Sudden Stop episodes.

Long-term debt contracts transfer aggregate risk from borrowing firms to lending banks. When aggregate shocks increase the future default probability of firms, banks are not compensated for the default risk of existing contracts. If banks are highly leveraged, this can lead to financial instability with severe repercussions in the real economy. To study this mechanism quantitatively, we build a macroeconomic model of financial intermediation with long-term defaultable loan contracts and calibrate it to match aggregate firm and bank exposure to business cycle risks. Our model exhibits banking crises that closely resemble observed crisis episodes. We find that such crises do not arise in an economy with short-term debt. Our results on the role of long-term debt completely reverse if financial regulation is implemented to increase banks' risk bearing capacity. The financial sector is then well equipped to take on the aggregate risk, such that long-term lending stabilizes the business cycle by providing insurance to the corporate sector.

Work in Progress

Long-term Coporate Debt and the Business Cycle: Hedging or Overhang?