A Geopolitical Shock to Bank Assets and Monetary Policy Transmission (with Falko Fecht and Björn Imbierowicz)
Geopolitical shocks are typically modeled as adverse supply shocks that warrant a ``look-through'' monetary policy stance. We identify a countervailing financial channel through which these shocks contract aggregate demand and amplify monetary policy transmission. For identification, we use banks’ exposure to sanctioned borrowers. Exploiting the 2022 Russian invasion of Ukraine as an exogenous shock to bank balance sheets, we find that banks with pre-existing exposures to sanctioned borrowers experience a surge in funding costs and sharply contract lending. Importantly, these financially constrained banks exhibit a higher sensitivity to subsequent monetary policy tightening, passing rate hikes through to borrowers more aggressively. Our results suggest that geopolitical fragmentation acts as a “silent tightening” that dampens inflationary pressure and potentiates central bank action.
Press Coverage: VoxEU
Presented at: ECB Research Workshop on Banking Analysis for Monetary Policy (2025), Bundesbank Research Seminar (2025), Sydney Banking and Financial Stability Conference (2025), Joint Banque de France - Bundesbank Conference on Monetary Policy (2025)
Collateral Easing and Safe Asset Scarcity: How Money Markets Benefit from Low-Quality Collateral (with Karol Paludkiewicz and Sascha Steffen)
We show that central bank lending against lower quality collateral can improve conditions in the money market. For identification we take advantage of a pandemic-related temporary extension of the collateral framework of the European Central Bank (ECB), which allows banks to pledge previously ineligible credit claims as collateral for refinancing operations. We use a difference-in-differences approach and exploit banks that do not mobilize credit claims ex ante as a control group. We find that banks affected by the temporary extension pledge newly eligible credit claims in order to reduce the encumbrance of high-quality marketable assets. Treated banks lend out these marketable assets as collateral in the repo market, which helps to alleviate asset scarcity.
Presented at: German Finance Association (scheduled), ECB Money Markets Conference (scheduled), European Economic Association (scheduled), Short-Term Funding Markets Conference (2024), OeNB/SUERF Annual Economic Conference (2024)
Securities Lending and Information Acquisition (with Stephan Jank, Pedro Saffi and Jason Sturgess)
reject & resubmit - Review of Finance
We show that mutual funds use information acquired by participating in the equity lending market to make portfolio allocation decisions. Using data from German mutual funds on their stock-level lending decisions, we find that funds lending shares are more likely to exit positions relative both to stocks that they do not lend and to funds that do not lend. Lenders also avoid losses by better timing the closure of long positions than for stocks they do not lend. Finally, we show information acquisition in the lending market allows lenders to front-run public disclosure of large short positions. The results suggest that the securities lending market provides a mechanism for mutual funds to acquire information.
Presented at: Rotterdam School of Management Seminar (2021), Mannheim Research Seminar (2020), Brazilian Finance Seminar (2020), Bundesbank Brownbag Seminar (2020), Inquire UK Seminar (2020), Florida State University Seminar (2020), SKEMA Business School Seminar (2020), Annual Financial Market Liquidity Conference (2020)
Dealer Intermediation Capacity and Repo Market Dynamics (with Yannik Schneider)
Securites Lending of Bank-Affiliated Funds (with Annabelle Bröstl and Stephan Jank)
Systemic Risk Channels of Asset Managers: Evidence from Hedge Funds and Mutual Funds
Using a sample of hedge funds and mutual funds, I examine two channels through which asset managers can contribute to systemic risk: the service channel when funds act as liquidity suppliers and the asset liquidation channel when funds act as liquidity demanders. Consistent with the latter channel being more important, I find that contributions to systemic risk increase significantly when hedge funds demand liquidity. Conversely, no such effect exists for mutual funds. A decomposition of systemic risk reveals that the higher level of systemic risk for liquidity-demanding hedge funds can be explained by a higher degree of interconnectedness. Providing further evidence for the asset liquidation channel, I document that systemic risk is considerably larger when hedge funds demand liquidity in times of low funding liquidity and during stock market boom and bust phases.
Presented at: Annual Hedge Fund Research Conference (poster session, 2020), Mannheim Research Seminar (2019), DGF Doctoral Students Seminar (2019), Sydney Banking and Financial Stability Conference (2019), Australasian Finance and Banking Conference (2019), New Zealand Finance Meeting (2019), HVB Doctoral Students Seminar (2018)