Research

“The difficulty lies not so much in developing new ideas as in escaping from old ones

- John Maynard Keynes -

My current research interests include financial intermediation, credit markets, monetary policy, financial crises, institutions, and corporate finance.  I am particularly interested in projects with real implications for policy-making, corporate decisions, and the broad economy.
 
I have presented my work at academic events such as the Financial Intermediation Research Society Conference, the FDIC/JFSR Annual Bank Research Conference, and the Financial Management Association Annual Conference. And I have held research seminars at many renowned venues including the Federal Reserve System, the Central Bank of Argentina, and a number of universities around the globe. My recent work has been published in the Journal of Financial and Quantitative Analysis, the Journal of Banking and Finance, and the Journal of Comparative Economics.

Recent Articles

“Business Loans and the Transmission of Monetary Policy”

With Andrea Civelli and Nicola Zaniboni

Journal of Financial and Quantitative Analysis, 2019

We study the transmission mechanism of monetary policy through business loans and illustrate subtle aspects of its functioning that relate to loans' contractual characteristics and borrower-lender types. We show that the puzzling increase in business loans in response to monetary tightening, documented before the Great Recession, is largely driven by drawdowns from existing commitments at large banks. Spot loans also rise and take considerable time to adjust. Banks, nonetheless, do curtail credit supply by shortening maturities of new loans. Following the Great Recession, the mechanism has worked differently, with loan responses to monetary tightening displaying a significant downward shift.

“Economic Policy Uncertainty and the Supply of Business Loans”

With Andrea Civelli

Journal of Banking and Finance, 2020

Using a Vector Autoregressive framework of analysis, we show that banks contract their supply of business credit in response to an exogenous increase in economic policy uncertainty. This contraction takes two main, distinct forms. On the one hand, banks restrict their supply of spot funds, which we document using flows of loans and term loan originations. On the other hand, banks also curtail their provision of liquidity insurance, reducing the amount of new credit lines and embedding in them a pricing structure that reduces the probability of borrowers drawing down on the lines. At the peak of the responses, we find that a one-standard-deviation increase in EPU causes a contraction in the supply of business loans between 3 and 5% on the extensive margin.

“Sleeping with the Enemy: The Perils of Having the Government

On(the)board”
With Martín Rossi and Christian Ruzzier

Journal of Comparative Economics, 2022
We study the causal effect of unsought political connections on firm value. To address concerns of potential endogeneity and sample-selection bias we exploit the nationalization of Argentina’s pension system, a unique natural experiment yielding exogenous variation in new political connections. We find unsought political connections to have a large negative effect on the value of newly connected firms. Yet this result only materializes when, in addition to becoming a shareholder, the government also obtains the right to appoint directors. Decreased stock liquidity or higher stock volatility do not explain this result, suggesting a channel that decreases expected cash flows to shareholders.

Working Papers

“Worth the Risk? The Performance of Banks Reliant on CLO Funding”

With Andrea Civelli

We study the effect of bank reliance on CLO funding on bank risk. We document that an exogenous increase in CLO funding significantly decreases bank expected default frequency, with a 1.6% reduction one quarter from the shock for the average bank in response to a standard funding shock. Changes in asset composition and income origination help explain this result. Upon an expansion in CLO funding, banks increase the origination of institutional business loans, fostering origination fees and net noninterest income. Banks also market a large share of the loans they participate in, decreasing the proportion of loans they hold on their balance sheets despite the rise in origination. The performance of the loans they retain on their balance sheets also improves, further strengthening bank conditions. Our results contribute to the literature on bank risk management and the increasing role the shadow banking system plays in funding banks and business lending, carrying relevant implications for the bank regulatory process.

“The Short-Term Effect of the Paycheck Protection Program on

Unemployment”

With Martín Rossi and Timothy Yeager

We study the short-term causal effect of the Paycheck Protection Program on unemployment. Using the 2019 density of Small Business Administration member bank offices in a county as an instrument for PPP loans originated in that county during April 2020, we find statistically and economically significant effects from the program on unemployment. Our results highlight the importance of this relief policy and the financial system infrastructure in preserving jobs during the COVID-19 crisis.