Working Papers
Unintended Consequences of QE: Real Estate Prices and Financial Stability (with Tobias Berg, Rainer Haselmann and Thomas Kick)
Abstract: We analyze the effects of central bank corporate debt purchases in a setting where the banking sector frictions they are supposed to address do not exist. We find that banks reallocate funding almost entirely to the real estate sector, which fuels real estate overvaluation and impairs financial stability. Our results imply an elasticity of residential real estate prices to credit supply of 0.84, which is considerably higher than prior estimates in the literature. Our findings show that in economies that do not suffer from credit supply frictions, central bank policies that further stimulate loan provision come with substantial adverse effects.
Selected Conferences: SFS Cavalcade North America 2024, EFA 2024
Media Coverage: Short Presentation at the SUERF-Bocconi-webinar 'The size of central bank balance sheets and financial stability'
Revise & Resubmit, Journal of Finance
Know Your Customer: Informed Trading by Banks (with Rainer Haselmann and Christian Leuz)
Abstract: This study analyzes informed trading of banks with lending relationships. We combine trade-by-trade supervisory and credit-registry data in Germany to examine banks' proprietary trading in borrower stocks. We start by observing that banks' portfolio returns are substantially higher for stocks with lending relationships. To separate bank expertise and informed trading due to their lending relationships, we study bank trading around corporate events. We find that relationship banks engage in net purchases (sales) weeks before events with positive (negative) news, even when these events are unscheduled, and unwind positions shortly after the event. This trading pattern is more pronounced when banks are likely to possess private borrower information and cannot be explained by specialized expertise. The results suggest that banks' lending relationships inform their trading and underscore the potential for conflicts of interest in universal banking, which has been a prominent concern in the regulatory debate for a long time.
Selected Conferences: NBER Big Data and Securities Markets 2023, EFA 2024, AFA 2025
Media Coverage: BFI Research Brief, Harvard Law School Forum on Corporate Governance, ProMarket
The Value of Private Meetings with Central Bankers (with Rainer Haselmann, Maik Schmeling and Michael Weber)
Abstract: We investigate the ECB’s main informal communication channel, private bilateral meetings of Executive Board members with financial market participants. These meetings are frequent with some institutional investors meeting ECB board members almost every quarter, but they became less frequent after meeting calendars were disclosed publicly and they are subject to a nationality bias. Using trade-level data from Germany, we show banks build up portfolio positions in Euro Area equities after meeting ECB board members and before the ECB announces expansionary monetary policy decisions and report higher trading profits in subsequent quarters. ECB board members' professional experience and educational background, rather than connectedness or capture, drive the results, consistent with an accidental disclosure of private information. Hence, ECB’s informal communication likely indeed conveys meaningful information to the market, but our findings raise concerns about the neutrality and biasedness of the ECB’s communication policy.
Selected Conferences: FIRS 2024, EFA 2024
Work in Progress
Allocative Effects of Green QE (single-authored)