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Research

My research interests include a wide variety of subfields of finance and macroeconomics. Most recently I have been looking at the effects of bank regulation on bank financing activity, particularly in short-term secured funding markets. In addition, I study the bank regulatory environment and incentives introduced by implementation of Basel III, particularly for large US bank holding companies and their net stable funding ratios and leverage ratios. I am also interested in the linkages between the real and financial sectors.

Aside from research my policy work has me deeply involved in short-term funding markets, banks and nonbank financial institutions, credit markets, liquidity regulations, and analyzing risks to financial stability arising from buildups of risks in particular sectors. Below is some of my work.


Publications


Do Higher Capital Standards Always Reduce Bank Risk? The Impact of the Basel Leverage Ratio on the U.S. Triparty Repo Market (with Jill Cetina and Ben Munyan - forthcoming at the Journal of Financial Intermediation)
This paper examines how risk-taking in the repurchase agreement, or repo, market changed after regulators introduced the supplementary leverage ratio for banks. The paper finds that broker-dealers owned by U.S. bank holding companies now borrow less in the repo market overall after the change, but a larger percentage of the borrowing is backed by more risky collateral.

Systemic Risk Indicators for Large U.S. Bank Holding Companies: An Overview of Recent Data (with Paul Glasserman and H. Peyton Young). Office of Financial Research. OFR Briefs. February 2015.

Systemic Importance Data Shed Light On Global Banking Risks (with Bert Loudis). Office of Financial Research. OFR Briefs. April 2016.


Works in Progress

The Effects of the Volcker Rule on Corporate Bond Trading: Evidence from the Underwriting Exemption

This paper examines potential intended and unintended effects from the Volcker rule on covered firms’ corporate bond trading.  We differentiate short-term roundtrip trades that likely qualify for the rule’s market making exemption from those of longer duration that would be Volcker-covered trades.  We also use the underwriting exemption to isolate the Volcker rule’s effects separate from other post-crisis changes in bank regulation or broader trends in market liquidity. We find no evidence of the intended reduction in the riskiness of covered firms’ corporate bond trading after Volcker implementation for covered trades.  However, we find significant adverse liquidity effects on covered firms’ corporate bond trading—with 65 to 90 basis points higher roundtrip costs for customers. These effects do not appear to be transitional.  The rule’s rebuttable presumption provision exerts little influence on covered firms’ corporate bond trading, suggesting reforms to reduce market impacts from the Volcker rule through changes to this provision may prove ineffective.



Identifying the Macroeconomic Effect of Loan Supply Shocks, Revisited
I review the literature on shocks to bank lending, building upon the work of Peek, Rosengren, and Tootell (2003) which uses a static model of confidential bank supervisory data as a measure of bank industry health and its predictive power in forecasting real economic activity. In this work I use a publicly observable measure from the FDIC to proxy for loan supply and extend the scope of the research to include the most recent financial crisis. I find that although the public data contains information about future real economic activity, the confidential supervisory data is more informative. The model is extended to include the loan supply shock into a dynamic system to estimate the effect banking industry health on real activity.


A Macroeconomic Model with Heterogeneous Firms, Banks, and Credit
We study a heterogeneous agent macro model with financial frictions similar to the Bernanke, Gertler, and Gilchrist (1999) financial accelerator model but with financial shocks originating in the banking sector. Firms with idiosyncratic productivity finance capital expenditures using wealth and bank financing. Banks fund loans using household deposits and a loan production function subject to exogenous variation, thus loan supply shocks have effects on the real economy. Macroprudential policy tools are studied as a possible way to attenuate the effects of the banking sector shock.