Working Papers
2025, Regulation and Intermediation in Over-the-counter Markets (Job Market Paper) [working paper - last updated Oct. 30 2025]
This paper examines the impact of banking regulation on the trading behavior of bank-affiliated dealers in over-the-counter (OTC) financial markets. I micro-found the regulatory costs of holding OTC traded assets using an equilibrium search model of a two-tiered OTC market in which risk-averse dealers facilitate trades for investors. Dealers choose portfolios of risk-free and risky OTC assets, and since they are bank-affiliated, are subject to a regulatory balance sheet constraint: a Basel-style risk-weighted asset ratio. Formally, I show that acquiring additional inventories tightens regulatory requirements and raises the shadow value of capital when regulatory slack is low. Regulatory balance sheet costs are heterogeneous and state-dependent, increasing with a dealer's distance-to-constraint and their inventories. In a calibration to the pre-2008 US corporate bond market, I show that as constraints bind, dealers reduce inventories at fire sale prices and only purchase assets at extreme discounts; however, trading costs rise. A policy experiment shows that stricter regulation increases trading costs and reduces intermediation quality in the investor market on average.
2025, Liquidity Crises and Endogenous Dealer Capacity in Over-the-counter Markets (Revise & Resubmit, Journal of Economic Theory) [working paper]
This paper studies how dealers provide liquidity in over-the-counter (OTC) markets during crises when they can choose their intermediation capacity: their order execution speed and inventories. I develop a search model of an OTC market where trade between homogeneous dealers is centralized, but investors face search frictions proportional to dealer order execution rates. Agents engage in bargaining over unit trade when they meet, where dealers charge intermediation fees. The model features a one-time aggregate unanticipated adverse liquidity shock to investors’ private valuations. I show that with more severe shocks, dealers choose lower order execution rates and wait longer to begin taking on inventories. Relative to a constrained planner, I identify a double-sided hold-up problem that can be resolved in the steady state, but not out of the steady state. A calibration to the U.S. secondary corporate bond market highlights that capacity inefficiencies are more consequential following a liquidity shock.
2026, Diversity and dissent at the board of directors: The case of the Banco de la República, with Cristian Frasser & Juan Acosta (Submitted) [working paper]
This article provides the first empirical analysis of the relationship between diversity and monetary policy dissent on the Board of Directors of the Banco de la República of Colombia. Using a novel dataset of Board votes spanning 2007–2024, we estimate a forward-looking Taylor rule augmented with Board composition characteristics. Boards with more women, economics PhDs, and U.S.-educated members tend to set lower policy rates, whereas Boards with more Bogotá-born members appear more hawkish. We also estimate models of dissent and identify a ‘dissent region’: when expected inflation moderately exceeds the 3\% target, votes are more likely to be contested, while very high expected inflation tends to unify the Board.
2024, The Role of Exchange Rate Variations in European Firms’ Investment, with Luis Reyes
We distinguish between the cost and demand effect of a currency depreciation on firm investment. The former takes place when the cost of existing debt increases with the value of the foreign currency in which it is denominated, whereas from the latter we expect an increase in the demand for exports. We test both and their overall effect on investment for high-income European non-financial firms and find that the positive demand effect outweighs the negative cost effect. We carry out firm-level and aggregate level dynamic linear panel regressions, distinguishing variations in the exchange rate, appreciations, and depreciations. This analysis is complemented by individual country VARs estimated for France, Germany, and the UK, in which we compare their impulse responses.
Work in Progress
Disagreement in Monetary Policy Voting: The Role of Heterogeneous Preferences, with Yelda Gungor
This paper studies how heterogeneous preferences and private information shape voting outcomes in monetary policy committees (MPCs). We utilize a strategic voting model in which each member’s preferences are represented by an individual Taylor rule that places different weights on inflation and the output gap. In a symmetric Bayesian Nash equilibrium, we show that members’ cutoff strategies depend on their inflation weights. We are in the process of hand-collecting interest rate votes and detailed biographical information for MPC members in the United States, the United Kingdom, Sweden, and Mexico, where individual voting records are disclosed. These data will allow us to estimate how members’ characteristics determine their inflation weights, and what the implications are for MPC decision making.
Collateral Re-use, Information Asymmetry, and Endogenous Fragility
Monetary Policy Implementation and Treasury Market Liquidity, with Zach Bethune
Other Publications
2025, Series superstars: How streaming-video-on-demand (SVOD) content popularity informs SVOD provider demand, with Anthony Palomba (International Journal on Media Management) [article] [pdf]