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Working Paper
The Effects of Macroeconomic Shocks: Household Financial Distress Matters
Mustre-del-Rio, Jose; Sanchez, Juan M.; Mather, Ryan; Athreya, Kartik B. (2023-09-11)
When a macroeconomic shock arrives, variation in household balance-sheet health (captured by the presence of financial distress “FD”), leads to differential access to credit, and hence a distribution of consumption responses. As we document, though, over the past two recessions, households in prior FD also experienced macroeconomic shocks more intensely than others, leading to a distribution of shock severity. Quantifying the importance of each dimension of heterogeneity (FD or shock severity) for consumption requires a structural model. We find that heterogeneity in FD matters more than ...
Working Papers , Paper 2019-025

Journal Article
Changes in Income Gaps Might Overstate Changes in Welfare Gaps
Zhu, Lijun; Sanchez, Juan M. (2015-07)
Changes in income of rich and poor households might overstate changes in welfare because the cost of goods favored by the rich is rising faster than the cost of goods consumed mainly by the poor and middle class.
The Regional Economist , Issue July

Working Paper
Consumption in the Great Recession: The Financial Distress Channel
Athreya, Kartik B.; Sanchez, Juan M.; Mather, Ryan; Mustre-del-Rio, Jose (2019-08-29)
During the Great Recession, the collapse of consumption across the US varied greatly but systematically with house-price declines. Our message is that household financial health matters for understanding this relationship. Two facts are essential for our finding: (1) the decline in house prices led to an increase in household financial distress (FD) prior to the decline in income during the recession, and (2) at the zip-code level, the prevalence of FD prior to the recession was positively correlated with house-price declines at the onset of the recession. We measure the power of the ...
Working Paper , Paper 19-13

Journal Article
An Elementary Model of VC Financing and Growth
Han, Pengfei; Greenwood, Jeremy; Sanchez, Juan M.; Inokuma, Hiroshi (2023-01-20)
This article uses an endogenous growth model to study how the improvements in financing for innovative start-ups brought by venture capital (VC) affect firm innovation and growth. Partial equilibrium results show how lending contracts change as financing efficiency improves, while general equilibrium results show that better screening and development of projects by VC investors leads to higher aggregate productivity growth.
Review , Volume 105 , Issue 1 , Pages 66-73

Working Paper
Policy Rules and Large Crises in Emerging Markets
Espino, Emilio; Kozlowski, Julian; Martin, Fernando M.; Sanchez, Juan M. (2023-10-14)
Emerging countries have increasingly adopted rules to discipline government policy. The COVID-19 shock led to widespread suspension and modification of these rules. We study rules and flexibility in a sovereign default model with domestic fiscal and monetary policies and long-term external debt. We find welfare gains from adopting monetary targets and debt limits during normal times. Though government policy cannot itself counteract fundamental shocks hitting the economy, the adoption of rules has a significant impact on policy, macroeconomic outcomes and welfare during large, unexpected ...
Working Papers , Paper 2022-018

Forbearance during COVID-19: How Many Borrowers Used It, and for How Long?
Sanchez, Juan M.; Wilkinson, Olivia (2022-05-31)
Sixteen percent of individuals with mortgages used forbearance between April 2020 and December 2021. For those requesting mortgage relief, how long did forbearance last?
On the Economy

Journal Article
Why is employment growth so low?
Sanchez, Juan M.; Thornton, Daniel L. (2011)
Anemic investment in residential and commercial real estate has been a significant factor contributing to slow growth in employment.
Economic Synopses

Working Paper
Improving Sovereign Debt Restructurings
Dvorkin, Maximiliano; Sanchez, Juan M.; Sapriza, Horacio; Yurdagul, Emircan (2022-04-06)
The wave of sovereign defaults in the early 1980s and the string of debt crises in subsequent decades have fostered proposals involving policy interventions in sovereign debt restructurings. The global ﬁnancial crisis and the recent global pandemic have further reignited this discussion among academics and policymakers. A key question about these policy proposals for debt restructurings that has proved hard to handle is how they inﬂuence the behavior of creditors and debtors. We address this challenge by evaluating policy proposals in a quantitative sovereign default model that ...
Working Paper , Paper 22-06

Working Paper
Sovereign Debt Restructurings
Dvorkin, Maximiliano; Sapriza, Horacio; Sanchez, Juan M.; Yurdagul, Emircan (2018-06-25)
Sovereign debt crises involve debt restructurings characterized by a mix of face-value haircuts and maturity extensions. The prevalence of maturity extensions has been hard to reconcile with economic theory. We develop a model of endogenous debt restructuring that captures key facts of sovereign debt and restructuring episodes. While debt dilution pushes for negative maturity extensions, three factors are important in overcoming the effects of dilution and generating maturity extensions upon restructurings: income recovery after default, credit exclusion after restructuring, and regulatory ...
Working Papers , Paper 2018-13

Working Paper
Household Financial Distress and the Burden of “Aggregate” Shocks
Athreya, Kartik B.; Sanchez, Juan M.; Mather, Ryan; Mustre-del-Rio, Jose (2020-09-10)
The goal of this paper is to show that household-level financial distress (FD) varies greatly, meaning there is unequal exposure to macroeconomic risk, and that FD can increase macroeconomic vulnerability. To do this, we first establish three facts: (i) regions in the U.S. vary significantly in their "FD-intensity," measured either by how much additional credit households therein can access, or in how delinquent they typically are on debts, (ii) shocks that are typically viewed as "aggregate" in nature hit geographic areas quite differently, and (iii) FD is an economic "preexisting ...
Working Papers , Paper 2019-025

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