Published Papers
Beyond the Headline: How Personal Inflation Exposure Shapes Households’ Financial Choices
Forthcoming at the Journal of Monetary Economics.
with Ch. Basten (University of Zurich) and M. Kukk (Bank of Estonia)
Abstract: Using a unique set of bank account-level data from a period of volatile inflation in a small open economy in 2005–11 and interactive fixed effect estimation, we find that individual consumption spending responds to personal inflation exposure beyond the headline rate. Households are exposed to different inflation because they have different expenditure baskets. For each percentage point of higher personal inflation rate, they increase their spending by 1.4%. These responses are consistent with intertemporal substitution when households form their inflation expectations from their personal experience. Increased spending is financed with savings or borrowing, except when households are liquidity-constrained or over-indebted. Extra demand when inflation is already high can make inflation persistent and dependent on its current distribution.
Targeted Monetary Policy, Dual Rates, and Bank Risk Taking,
European Economic Review, 2024, 170, 104889.
with F. Barbiero (ECB), L. Burlon (ECB), and M. Dimou (ECB).
Abstract: We assess whether dual interest rates – central bank funding at rates below the interest rates on reserves – influence the size and composition of bank credit. We measure exposure to the policy using daily reactions of bank funding costs to the announcement of the recalibration of the ECB’s TLTROs in April 2020. We then use the Euro area credit register to follow the evolution of bank lending conditions and risk-taking. We find that the measure had a strong positive effect on bank credit and, in contrast to a standard rate cut, was not accompanied by an increase in risk-taking.
Working Papers
with M. Benetton (UC Berkley), W. Mullins (UC San Diego), and M. Niessner (Indiana).
Abstract: Celebrities have long leveraged their influence to shape outcomes in politics, marketing, and now in cryptocurrency markets. Using survey, market, and transaction-level data, we examine the persuasion rates of celebrity cryptocurrency endorsements on Twitter. Investors appear to treat these celebrity tweets as financial advice: controlling for crypto-related news, the probability of cryptocurrency investment by individuals on tweet days increases by 14%, with stronger effects among men, wealthier individuals, and older investors. Our estimates translate into relatively high persuasion rates and impact equilibrium outcomes-market trading volume in the targeted coin increases by 8% in the hour following the celebrity tweet. Finally, we show that a representative retail investor who trades following celebrity tweets makes negative returns after transaction costs.
Spend or Invest? Analyzing MPC Heterogeneity Across Three Stimulus Programs
Job Market Paper
Abstract: What drives variation in the use of windfall income? I employ granular transaction data gathered by an account aggregator application to study how personal circumstances drive cross-sectional and within-person variation in the marginal propensity to consume (MPC) across the three pandemic stimulus programs in the U.S. Using an imputation estimator, I recover the distribution of spending responses and show that liquidity constraints and indebtedness play an important role in explaining within-person variation in MPCs. Less affluent individuals consume out of stimulus, while wealthier ones repay debts and invest. Increases in short-term debt lead to higher repayments but lower consumption out of transfers, indicating that debt may crowd out consumption and reduce the immediate impact of stimulus. Repeated use of stimulus and pandemic restrictions led to lower MPCs. I further document a modest effect of fiscal transfers on retail investments, but a strong effect on market participation, with a large gender gap in the propensity to invest.
Retail Investors' Cryptocurrency Investments
with V. Pursiainen (University of St. Gallen).
Abstract: We use transaction data gathered by a large fintech firm to study retail investors’ investments in cryptocurrencies. Crypto investors tend to be male, young, high-income, and risk-seeking -- but less so for later adopters. While crypto adoption has increased substantially, most of the trading activity is attributable to a small share of investors. Most crypto investors make very few investments and never monetize them by withdrawing. Initial return experience is a strong predictor of further crypto investments. Men trade more actively than women, and their trading activity responds more strongly to past returns, as well as to initial return experience.
Work in progress (drafts available upon request)
Pent Up Demand: Consumer Spending on Durables & Memorables
with M. Brown (Study Center Gerzensee and Uni St. Gallen) and M. Hamoud (University of Zurich)
Inflation Relief Checks
with A. Fuster (EPFL)
Geographical Ring-Fencing
with Ch. Basten (University of Zurich).