Job Market Paper
This paper assesses the impact of monetary policy shocks on credit reallocation and evaluates the importance of theoretical transmission mechanisms. Compustat data covering 1974 through 2016 is used to compute quarterly measures of credit flows. I find that expansionary monetary policy is associated with positive long-term credit creation and credit reallocation for high default probability firms and negative short-term credit creation for firms with high debt service. These results are consistent with the balance sheet channel of monetary policy and mechanisms that reduce lenders' risk perceptions and increase the tendency to search for yield. Furthermore, given that, on average, high default probability firms exhibit low investment efficiency, the estimation results suggest that expansionary monetary policy may have a negative impact on future economic growth.
Work in Progress
"Trade Flows and Credit Shocks in Global Supply Chains"
Abstract: The global trade collapse of the late 2000s was due, in part, to strained credit markets and the vulnerability of exporters to adverse credit conditions. Using data between 1995 to 2011, this paper evaluates the impacts of upstream and downstream credit conditions and credit crises on bilateral trade. I find that upstream and downstream sectors' needs for external financing are negatively associated with trade flows when credit costs are high, although the effect on trade flows is dampened for downstream sectors. I also find that trade credit dependence and collateral values are associated with trade flows for downstream sectors when the importing country's credit costs are high. There are amplifying effects of credit costs for sectors that are highly dependent on external financing when the importing or exporting country is in credit crisis, while the magnitude is larger when the exporting country is in credit crisis. Further, I find that these effects on trade flows are large when the exporting country is a developed economy, but muted for developing economies
"The Effect of Unconventional Monetary Policy on the Creation and Destruction of Credit" (with Ana Maria Herrera)
Abstract: In this paper, we highlight the quantitative effects of monetary policy during and after the financial crisis of the late 2000s. We find that unconventional monetary policy had a substantial impact on credit creation and destruction during this time. Further, we find that this reallocation of credit depends on specific firm characteristics and length of debt maturity.