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Working Paper
A Local Projections Approach to Difference-in-Differences Event Studies
Many of the challenges in the estimation of dynamic heterogeneous treatment effects can be resolved with local projection (LP) estimators of the sort used in applied macroeconometrics. This approach provides a convenient alternative to the more complicated solutions proposed in the recent literature on Difference in-Differences (DiD). The key is to combine LPs with a flexible ‘clean control’ condition to define appropriate sets of treated and control units. Our proposed LP-DiD estimator is clear, simple, easy and fast to compute, and it is transparent and flexible in its handling of ...
Working Paper
House Price Growth Interdependencies and Comovement
This paper examines house price diffusion across metropolitan areas in the United States. We develop a generalization of the Hamilton and Owyang (2012) Markov-switching model, where we incorporate direct regional spillovers using a spatial weighting matrix. The Markov-switching framework allows consideration for house price movements that occur due to similar timing of downturns across MSAs. The inclusion of the spatial weighting matrix improves fit compared to a standard endogenous clustering model. We find seven clusters of MSAs that experience idiosyncratic recessions plus one distinct ...
Working Paper
Risk-Shifting, Regulation, and Government Assistance
This paper examines an episode when policy response to a financial crisis effectively incentivized financial institutions to reallocate their portfolios toward safe assets. Following a shift to a regime of enhanced regulation and scaled-down public assistance during the savings and loan crisis in 1989, I find that thrifts with a high probability of failure increased their composition of safe assets relative to thrifts with a low probability of failure. The findings also show a shift to safe assets among stock thrifts relative to mutual thrifts, thereby providing evidence of risk-shifting from ...
Working Paper
When is the Fiscal Multiplier High? A Comparison of Four Business Cycle Phases
We synthesize the recent, at times conflicting, empirical literature regarding whether fiscal policy is more effective during certain points in the business cycle. Evidence of state dependence in the multiplier depends critically on how the business cycle is defined. Estimates of the fiscal multiplier do not change when the unemployment rate is above or below its trend. However, we find that the multiplier is higher when the unemployment rate is increasing relative to when it is decreasing. This result holds using both a long time-series at the U.S. national level and for a panel of U.S. ...
Working Paper
Scenario-based Quantile Connectedness of the U.S. Interbank Liquidity Risk Network
We characterize the U.S. interbank liquidity risk network based on a supervisory dataset, using a scenario-based quantile network connectedness approach. In terms of methodology, we consider a quantile vector autoregressive model with unobserved heterogeneity and propose a Bayesian nuclear norm estimation method. A common factor structure is employed to deal with unobserved heterogeneity that may exhibit endogeneity within the network. Then we develop a scenario-based quantile network connectedness framework by accommodating various economic scenarios, through a scenario-based moving average ...
Working Paper
Simultaneous Spatial Panel Data Models with Common Shocks
I consider a simultaneous spatial panel data model, jointly modeling three effects: simultaneous effects, spatial effects and common shock effects. This joint modeling and consideration of cross-sectional heteroskedasticity result in a large number of incidental parameters. I propose two estimation approaches, a quasi-maximum likelihood (QML) method and an iterative generalized principal components (IGPC) method. I develop full inferential theories for the estimation approaches and study the trade-off between the model specifications and their respective asymptotic properties. I further ...
Working Paper
Local Projections Bootstrap Inference
Bootstrap procedures for local projections typically rely on assuming that the data generating process (DGP) is a finite order vector autoregression (VAR), often taken to be that implied by the local projection at horizon 1. Although convenient, it is well documented that a VAR can be a poor approximation to impulse dynamics at horizons beyond its lag length. In this paper we assume instead that the precise form of the parametric model generating the data is not known. If one is willing to assume that the DGP is perhaps an infinite order process, a larger class of models can be accommodated ...
Working Paper
Effects of US quantitative easing on emerging market economies
We estimate international spillover effects of US Quantitative Easing (QE) on emerging market economies. Using a Bayesian VAR on monthly US macroeconomic and financial data, we first identify the US QE shock with non-recursive identifying restrictions. We estimate strong and robust macroeconomic and financial impacts of the US QE shock on US output, consumer prices, long-term yields, and asset prices. The identified US QE shock is then used in a monthly Bayesian panel VAR for emerging market economies to infer the spillover effects on these countries. We find that an expansionary US QE shock ...
Working Paper
The Rise of Fintech Lending to Small Businesses: Businesses’ Perspectives on Borrowing
Online lending through fintech firms is a rapidly expanding segment of the financial market that is receiving much attention from investors and increasing scrutiny from regulators. Research is only beginning to assess how fintech firms’ entry is altering the choices and outcomes of small businesses that borrow from them. The Federal Reserve Small Business Credit Survey is a unique data source on the experiences of business owners with new and more traditional sources of credit. We find that the businesses using online lenders are not representative of small and medium-size enterprise in the ...
Working Paper
Does Medicaid Generosity Affect Household Income?
Almost all recent literature on Medicaid and labor supply has used Affordable Care Act (ACA)-induced Medicaid eligibility expansions in various states as natural experiments. Estimated effects on employment and earnings differ widely due to differences in the scope of eligibility expansion across states and are potentially subject to biases due to policy endogeneity. Using a Regression Kink Design (RKD) framework, this paper takes a uniquely different approach to the identification of the effect of Medicaid generosity on household income. Both state-level data and March CPS data from ...