Published Papers

"Commonality in Credit Spread Changes: Dealer Inventory and Intermediary Distress" with Zhiguo He and Zhaogang Song [Draft]  [Published] (Review of Financial Studies, 2022)

Two intermediary factors explain nearly 50% of the puzzling common variation of credit spread changes beyond canonical structural variables. Besides explanatory power, our core focus is on the cross-sectional patterns of bond and non-bond loadings our two factors, which help identify various mechanisms at play

"Comparative Valuation Dynamics in Production Economies" with Lars Hansen and Fabrice Tourre [Draft] [Online Appendices]  [Model Comparisons Toolbox] (Annual Reviews of Financial Economics, forthcoming)

This paper develops a theoretical framework to nest many recent macroeconomic models with and without financial frictions. We study the macroeconomic and asset pricing properties of this class of models, identify common features, highlight areas where these models depart from each other, and offer new insights. 

Working Papers

"Risk Premia, Subjective Beliefs, and Forward Guidance" with Anna Cieslak [Draft]

In the context of monetary policy, establishes a necessary and sufficient condition (Long-Run Neutrality) for identifying shocks to investor beliefs about future interest rates, and thus the effects of forward guidance. We show that Long-Run Neutrality seems to fail empirically. 

"Rational Sentiment and Financial Frictions"  with Fernando Mendo [Draft]  [Presentation Video]

Very common financial frictions induce a two-way feedback loop between asset prices and the real economy. This loop alone can justify self-fulfilling fluctuations ("sentiment"). Sentiment can help with some puzzles, permitting: high volatility, sudden financial crises, and booms that predict busts. 

"Dynamic Self-Fulfilling Fire Sales"  with Fernando Mendo [Draft]

Even with hedging markets on all fundamental shocks, self-fulfilling fire sales can emerge in a dynamic environment with equity-issuance frictions. We also provide a refinement that selects the fire-sale equilibrium and rules out the safe equilibrium. 

"Fear, Indeterminacy, and Policy Responses"  with Fernando Mendo [Draft]

A new type of self-fulfilling volatility in New Keynesian models, which is real (not nominal) and sustained by risk premia during recessions. Monetary policy cannot not kill these equilibria, but active fiscal policy generically does. 

"Segmentation and Beliefs: A Theory of Self-Fulfilling Idiosyncratic Risk"  with Alex Zentefis [Draft]

A segmented-markets model that permits self-fulfilling price volatility. Applications: helps explain the factor structure in firm-level idiosyncratic risk and exchange rate disconnect in international macro. 

"The Risk of Risk-Sharing: Diversification and Boom-Bust Cycles"  [Draft]

I model a shock whereby financial intermediaries can better diversify borrowers’ idiosyncratic risks. This improvement sets off a cycle: a fragile sectoral boom predictably ends in an economy-wide bust through excessive financier leverage, consistent with some past cycles like the 2000s US housing cycle.

"Entry and Slow-Moving Capital: Using asset markets to infer the costs of risk concentration" [Draft]

Asset prices encode costs of risk concentration, through the friction in capital mobility during crises. In models of slow-moving capital, such frictions must be enormous to match risk premia levels and variability. In many cases, features that raise risk premia levels reduce their variability, and vice versa. 

"Human Capital in a Time of Low Real Rates" with Jung Sakong [Draft]

Low interest rates can cause higher labor income inequality, lower intergenerational mobility, and the emergence of the working rich. The mechanism is human capital "tilting": in response to low rates, rich households increase investments into their children's human capital, moreso than poor households. 

"Financial Frictions and Aggregate Fluctuations"  [Draft]

Aggregate fluctuations emerge out of idiosyncratic shocks if and only if there are financial frictions. By modeling a weak (network-like) dependence structure across economic agents, this failure of the law of large numbers holds generically and does not require any assumptions about fat-tailed size distributions.