Welcome to my homepage!
In 2013, I graduated with a Ph.D. in Economics from the London School of Economics and Political Science, where I was a Deutsche Bank Fellow at the Financial Markets Group. In Spring 2012, I visited the Department of Economics at New York University.
In September 2013, I joined the Bank of Canada as a research economist, where I am currently a Senior Economist in the Financial Studies Division.
- Banking, Financial crises, Global games, International finance
- "Information choice and amplification of financial crises" (with Ali Kakhbod, MIT)
We propose an amplification mechanism of financial crises based on the information choice of investors. Information acquisition always makes investors more likely to act against what is suggested by the prior. Deteriorating public news under an initially strong (weak) prior increases (reduces) the value of private information and induces more (less) information acquisition. Deteriorating public news always increases the probability of a crisis, since the initially strong (weak) prior suggests do-not-attack (attack). This effect is amplified when information choices are endogenous. To enhance financial stability, a policymaker can use taxes and subsidies to affect information acquisition. We also derive implications about the magnitude of amplification and discuss how these can be tested.Accepted, Review of Financial Studies(Previous version published as Bank of Canada Staff Working Paper 2014-30)
- "Rollover Risk, Liquidity and Macroprudential Regulation"
I study rollover risk in wholesale funding markets when intermediaries hold liquidity ex ante and fire sales may occur ex post. Multiple equilibria exist in a global rollover game: intermediate liquidity holdings support equilibria with both positive and zero expected liquidation. A simple uniqueness refinement pins down the private liquidity choice, which balances the forgone expected return on investment with reduced fragility and costly liquidation. Due to fire sales, liquidity holdings are strategic substitutes. Intermediaries free ride on the holdings of other intermediaries, causing excessive liquidation. To internalize the systemic nature of liquidity, a macroprudential authority imposes liquidity buffers.Accepted, Journal of Money, Credit and Banking(Previous versions published as ECB WP 1667 and Bank of Canada WP 2014-23)
- "Opaque Assets and Rollover Risk" (with Benjamin D. Nelson, Bank
We model the asset opacity choice of a bank subject to rollover risk in wholesale funding markets. Greater opacity means investors form more dispersed beliefs about bank profitability. The endogenous benefit of opacity is lower fragility when profitability is expected to be high. However, the endogenous cost of opacity is a ‘partial run’, whereby some investors receive bad private signals about profitability and run even though the bank is solvent. We find that banks choose to be transparent (opaque) when expected profitability is low (high). Banks with less volatile profitability are also more likely to choose to be opaque.Bank of Canada Working Paper 2016-17Resubmitted, Journal of Financial Intermediation
- "Asset Encumbrance, Bank Funding, and Financial Fragility" (with Kartik Anand, Deutsche Bundesbank; Prasanna Gai, University of Auckland; and James Chapman, Bank of Canada)
How does asset encumbrance affect the fragility of intermediaries subject to rollover risk? We offer a model in which a bank issues covered bonds backed by a pool of assets that is bankruptcy-remote and replenished following losses. Encumbering assets allows a bank to raise cheap secured debt and expand profitable investment, but it also concentrates risk on unsecured debt and thus exacerbates fragility and raises unsecured funding costs. Deposit insurance or wholesale funding guarantees induce excessive encumbrance and fragility. To mitigate such risk-shifting, we study prudential regulatory tools, including limits on encumbrance, minimum capital requirements, and surcharges for encumbrance.Bank of Canada Working Paper 2016-16To be presented at the 2017 AFA in Chicago
- "A wake-up call theory of contagion" (with Christoph Bertsch, Sveriges Riksbank)
We propose a theory of contagion based on the information choice of investors after a wake-up call. We study global coordination games of regime change in two regions, where local fundamentals share an initially unobserved common component. A crisis in the other region is a wake-up call to investors, inducing a reassessment of local fundamentals and the acquisition of information about the common component. Contagion occurs even if investors learn that there is no exposure to the crisis region and common investor or balance sheet links are absent. A policymaker with favorable private information can mitigate contagion by enhancing transparency.Bank of Canada Working Paper 2015-14Presented at 2014 NBER Summer Institute
Work in progress
- "Information Contagion in Global Games of Regime Change" (with Christoph Bertsch, Sveriges Riksbank)
- "The Effect of Safe Assets on Financial Fragility in a Bank-Run Model" (with Mahmoud Elamin, Cleveland Fed)
- "Cheap but flighty: how global imbalances create financial fragility" (with Enrico Perotti, U Amsterdam)
A wealth shift to emerging countries may lead to instability in developed countries. Investors from emerging countries exposed to expropriation risk are willing to pay a safety premium to invest in countries with good property rights. Intermediaries compete for such cheap funding by carving out absolutely safe claims, which requires demandable debt. While these safety-seeking inflows allow developed countries to expand credit, risk-intolerant foreign investors withdraw even under minimal uncertainty. More foreign funding causes larger and more frequent runs. As excess liquidation causes social losses, a domestic planner may seek prudential measures on the scale of foreign inflows.
- "Information Contagion and Systemic Risk" (with Co-Pierre Georg, U Cape Town and Bundesbank)
- "Eurobonds" (with Pierre Chaigneau, HEC Montreal)