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Foreign Shocks as Granular Fluctuations
di Giovanni, Julian; Levchenko, Andrei A.; Mejean, Isabelle (2020-11-01)
This paper uses a data set covering the universe of French firm-level sales, imports, and exports over the period 1993-2007 and a quantitative multi-country model to study the international transmission of business cycle shocks at both the micro and the macro levels. The largest firms are both important enough to generate aggregate fluctuations (Gabaix 2011), and most likely to be internationally connected. This implies that foreign shocks are transmitted to the domestic economy primarily through the largest firms. We first document a novel stylized fact: larger French firms are significantly ...
Staff Reports , Paper 947

Report
Firm-to-Firm Relationships and the Pass-Through of Shocks: Theory and Evidence
Heise, Sebastian (2019-08-01)
Economists have long suspected that firm-to-firm relationships might lower the responsiveness of prices to shocks due to the use of fixed-price contracts. Using transaction-level U.S. import data, I show that the pass-through of exchange rate shocks in fact rises as a relationship grows older. Based on novel stylized facts about a relationship?s life cycle, I develop a model of relationship dynamics in which a buyer-seller pair accumulates relationship capital to lower production costs under limited commitment. The structurally estimated model generates countercyclical markups and ...
Staff Reports , Paper 896

Working Paper
Weathering the Storm: Supply Chains and Climate Risk
Morales, Nicolas; Khanna, Gaurav; Castro-Vincenzi, Juanma; Pandalai-Nayar, Nitya (2024-04)
We characterize how firms structure supply chains under climate risk. Using new data on the universe of firm-to-firm transactions from an Indian state, we show that firms diversify sourcing locations, and suppliers exposed to climate risk charge lower prices. Our event-study analysis finds that firms with suppliers in flood-affected districts experience a decline in inputs lasting two months, followed by a return to original suppliers. We develop a general equilibrium model of firm input sourcing under climate risk. Firms diversify identical inputs from suppliers across space, trading off the ...
Working Paper , Paper 24-03

Discussion Paper
Quantifying Cyber Risk in the Financial Services Industry
Santucci, Larry (2018-11-11)
The Consumer Finance Institute hosted a workshop in February 2017 featuring James Fox, partner and principal at PricewaterhouseCoopers (PwC) and a leading authority on cybersecurity in the financial services industry. He discussed the importance of measuring cyber risk, highlighted some challenges that financial institutions face in measuring cyber risk, and assessed several leading cyber-risk management methodologies. Fox also provided some recommendations for bank exams and insights into how federal agencies might begin to quantify systemic cyber risk. This paper summarizes Fox?s ...
Consumer Finance Institute discussion papers , Paper 18-3

Report
Counterparty risk in material supply contracts
Boyarchenko, Nina; Costello, Anna M. (2014-10-01)
This paper explores the sources of counterparty risk in material supply relationships. Using long-term supply contracts collected from SEC filings, we test whether three sources of counterparty risk?financial exposure, product quality risk, and redeployability risk?are priced in the equity returns of linked firms. Our results show that equity holders require compensation for exposure to all three sources of risk. Specifically, offering trade credit to counterparties and investing in relationship-specific assets increase the firm?s exposure to counterparty risk. Further, we show that contracts ...
Staff Reports , Paper 694

Working Paper
Collaboration in Bipartite Networks, with an Application to Coauthorship Networks
Zimmermann, Christian; Hsieh, Chih-Sheng; König, Michael D.; Liu, Xiaodong (2020-08-17)
This paper studies the impact of collaboration on research output. First, we build a micro founded model for scientific knowledge production, where collaboration between researchers is represented by a bipartite network. The equilibrium of the game incorporates both the complementarity effect between collaborating researchers and the substitutability effect between concurrent projects of the same researcher. Next, we develop a Bayesian MCMC procedure to estimate the structural parameters, taking into account the endogenous matching of researchers and projects. Finally, we illustrate the ...
Working Papers , Paper 2020-030

Report
Estimating Demand Shocks from Foot Traffic: A Big-Data Approach
Azzimonti, Marina; Wiczer, David; Xuan, Yang (2026-04-01)
This study leverages high-frequency foot-traffic data from SafeGraph to estimate demand shocks in customer-facing establishments across New York City’s retail, service, and health sectors. Recognizing that variations in foot traffic can arise from both unpredictable demand shocks and firm-driven strategies to attract customers, we present a theoretical framework that isolates establishment-level demand fluctuations from firm-level strategic choices. Implementing this empirically, we employ an unsupervised machine learning approach to classify establishments into distinct categories that are ...
Staff Reports , Paper 1191

Working Paper
Identifying Contagion in a Banking Network
Wilson, Mungo; Zikes, Filip; Vasios, Michalis; Morrison, Alan (2017-08-15)
We present the first micro-level evidence of the transmission of shocks through financial networks. Using the network of credit default swap (CDS) transactions between banks, we identify bank CDS returns attributable to counterparty losses. A bank's own CDS spread increases whenever counterparties from whom it has purchased default protection themselves experience losses. We find no such effect from losses of non-counterparties, nor from counterparties to whom the bank has sold protection. The effect on bank CDS returns through this counterparty loss channel is large relative to the direct ...
Finance and Economics Discussion Series , Paper 2017-082

Working Paper
Intermediation in Networks
Siedlarek, Jan-Peter (2015-10-09)
I study intermediation in networked markets using a stochastic model of multilateral bargaining in which players compete on different routes through the network. I characterize stationary equilibrium payoffs as the fixed point of a set of intuitive value function equations and study efficiency and the impact of network structure on payoffs. There is never too little trade but there may be an inefficiency through too much trade in states where delay would be efficient. With homogeneous trade surplus the payoffs for players that are not essential to a trade opportunity go to zero as trade ...
Working Papers (Old Series) , Paper 1518

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