YANGFAN SUN

Welcome to my site!

My name is Yangfan Sun and I am a Ph.D. Candidate in Economics at Georgetown University. My research interests include household finance and banking.

I will be available for a job market interview during the 2020-2021 academic year.

Here is my CV (updated in Oct 2020).

Primary Fields: Financial Economics, Macroeconomics

Secondary Fields: Household Finance, Banking

Job Market Paper

The Impact of Different Foreclosure Laws on Mortgage Foreclosure

Abstract: Foreclosure laws govern how and when a default homeowner can be evicted and the home can be put up for sale. Both judicial and non-judicial states exist in the U.S., with judicial states having longer, more uncertain and costlier foreclosure process. While naturally mortgage rate should be adjusted to reflect the difference in foreclosure risk, it does not differ across judicial and non-judicial states. Government sponsored enterprises (GSEs) disassociate mortgage rate from foreclosure risk through a uniformly priced guarantee service that covers all credit risks related to foreclosure, and impose a cross-subsidization. I build a dynamic structural model that allows households to make mortgage payment decision under explicit foreclosure process. The model shows that judicial law provides more protection to households, but leads to higher foreclosure rate and longer duration, which attribute to a cross-subsidization from non-judicial to judicial states. I then study a counterfactual experiment in which GSEs charge differential fees while keeping the budget unaffected. Eliminating the cross-subsidization requires higher (lower) fee in judicial (non-judicial) states. It further increases foreclosure rate and duration for low credit score households in judicial states, and vice versa in non-judicial states. While aggregate welfare does not change, households in non-judicial states benefit at the cost of those in judicial states. Welfare redistribution mainly falls on low income households.

Publication

Borrower Protection and the Supply of Credit: Evidence from Foreclosure Laws, with Jihad Dagher, Journal of Financial Economics 121 (2016), 195-209.

Abstract: Laws governing the foreclosure process can have direct consequences for the costs of fore- closure and, therefore could affect lending decisions. We exploit the heterogeneity in judi- cial requirements across US states to examine their impact on banks’ lending decisions in a sample of urban areas straddling state borders. A key feature of our study is the way it exploits an exogenous cutoff in loan eligibility to government-sponsored enterprises (GSEs) guarantees, which shift the burden of foreclosure costs onto the GSEs. We find that judicial requirements reduce the supply of credit only for jumbo loans, which are ineligible for GSE guarantees, i.e., in the nonsubsidized segment of the market. Thus, while we find a signif- icant effect on credit supply, the aggregate impact is muted by the indirect cross-subsidy by the GSEs to borrower-friendly states.

Working Paper

Time is Money: Relationship Lending and the Role of Community Banks in Paycheck Protection Program, with Christopher M. James and Jing Lu (Revise and Resubmit at Journal of Banking & Finance)

Abstract: We argue that the focus of community banks on relationship lending to small businesses combined with their relatively simple organizational structure allowed them to respond faster to Paycheck Protection Program (PPP) loan requests than larger banks. Consistent with this argument we find, controlling for local economic conditions, more PPP lending per small business in areas where community banks hold larger market shares and in areas in which community banks made more PPP loans relative to larger banks. In addition, consistent with a greater reliance on relationship lending, we find that the distance between borrowers and their PPP lender is significantly less at community banks than at larger banks. Consistent with differences in lending technology, we find distance is a more important determinant of Small Business Administration (SBA) loan performance at community banks than at larger banks. Our finding suggest that community banks remain an important conduit for small business funding particularly during crises when a rapid response is required.

Bank Mortgage Geographic Footprint: Genuine Diversification or Riding the Bubble? with Sophia Chen and Lev Ratnovski

Abstract: We examine the effects of geographic diversification on the return and risk of bank mortgage portfolios for the U.S. banks over 2001-2013. We distinguish broad-based geographic diversification and the expansion to “bubbly” areas. We find that broad-based diversification increased the return and decreased the risk of bank mortgage portfolios. In contrast, the expansion to “bubbly” areas increased both return and risk of bank mortgage portfolios. The effect of bubbly expansion on mortgage portfolio risk were predictable from historic house price dynamics, but turned out to be even higher based on realized house prices.

How does Post-Crisis Bank Capital Adequacy Affect Firm Investment, with Hui Tong, IMF Working Paper, WP/15/145.

Abstract: We examine the effect of bank capital levels on firm investment drawing on a sample of 11,106 non-financial firms from 2007 to 2013 in 16 advanced economies. We examine two measures of bank capital adequacy, the Tier 1 ratio and a simple leverage ratio, and find that firms with larger external financial needs invest relatively more when domestic financial systems have relatively high leverage ratios. This pattern is more pronounced for those firms that have sound fundamentals, suggesting that bank balance sheets and their willingness to extend credit can be an important factor in determining aggregate investment and growth outcomes. The empirical findings are robust to a range of specifications. Bank Tier 1 capital ratio does not appear to have a significant effect on corporate investment, possibly because a higher Tier 1 ratio also captures a high share of assets with low risk weights.

Teaching

Teaching Assistant

• Advanced Econometrics (Master program) - Teaching Assistant to Professor Peracchi, Fall 2020

• International Economics (Undergradudate) - Teaching Assistant to Professor Cumby, Spring 2020

• Advacned Data Analysis (Master program) - Teaching Assistant to Professor Peracchi, Spring 2019

• Economic Principles: Macroeconomics (Undergraduate) - Head Teaching Assistant to Professor Rogers, Fall 2018

• Data Analysis (Master program) - Teaching Assistant to Professor Peracchi, Fall 2016