Research

The Market Impact of Fed Communications: The Role of the Press Conference (with Kunal Sangani)

We document a shift in the market impact of the press conference given by the Federal Reserve Chair at the close of FOMC meetings. Using intraday trading data, we find that market volatility is more than three times higher during press conferences given by current Chair Jerome Powell than during press conferences by predecessors Janet Yellen and Ben Bernanke. Press conferences since the start of Covid-19 are largely responsible for the heightened market volatility during Chair Powell’s conferences. During this period, we find that the market tends to move in the opposite direction during the press conferences compared to its movement following the FOMC statement publication. In contrast, press conferences by Chairs Bernanke and Yellen tended to reinforce the market’s initial reaction to the information released in the FOMC statement. Text analysis of the Q&A portions of Powell’s press conferences suggests that his choice of language correlates with these market movements. We find that Fed communications during the recent period have been less effective in reducing forward-looking interest rate uncertainty.

Media Coverage: Wall Street Journal, Bloomberg, Investopedia.

Whose Bridge to Opportunity? Explaining Impact Variation of Sectoral Training (with Kadeem Noray) Draft coming soon.

We investigate heterogeneity in the impact of Year Up, one of the most successful job training programs ever evaluated in an OECD country. We employ a machine learning approach called causal forests to detect systematic variation in Year Up’s effect on earnings across subgroups. We find sizable variation: those in the bottom quintile receive only one third of the gains of the top quintile. Relative to the top quintile, the bottom is substantially more likely to be female, black, and poor, but does not differ meaningfully on measures of cognitive skills. We complement our analysis of heterogeneity by investigating the mechanisms behind Year Up’s success: we find strong evidence that variation in the impact is explaining by the initial job placement rather than improvements in non-cognitive skills or career knowledge. Finally, we demonstrate that the experimental control group’s earnings trajectory is nearly identical to that of a naively matched comparison group in the Census, which suggests that our results are not driven by sample selection caused by Year Up’s unique screening process.

Chinese Innovation Measurement 

(with Josh Lerner and Amit Seru)

The Aggregate Effects on Innovation of Contracting Frictions in Private Capital Markets (joint with Adriano Fernandes)

Finite contracts between savers and managers of private capital funds might have an aggregate effect on innovation if the managers are prevented from investing optimally in ventures. Our empirical setting of interest is investment in battery technology. In the data, finite contracts—usually 10-years long—between investors and fund managers seem to influence managers’ investment decisions. 90% of all capital is deployed within the first three years of the fund, and almost all exits occur before the 10 years are up. Furthermore, fund managers invest in safer firms as they get closer to the date when they must return capital to the investors. We incorporate these findings in a simple model where ventures are heterogeneous in the expected time in which their outcome is realized and their expected market size. Due to contracting frictions, the competitive equilibrium allocation of capital across different types of technology leads to too little diversity compared to a socially efficient benchmark. The social planner would like to increase diversity across types of technologies that are funded because it increases the chances that a higher productivity innovation is discovered.

Other works in progress

Low-for-Long Interest Rates and the Rise of Private Capital Markets in Asia

Misallocation and Network Externalities in Inefficient Economies: A Study of the Coal Industry in India (with Tishara Garg)