Research

Working papers

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.

Targeted Monetary Policy, Dual Rates, and Bank Risk Taking

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 high-frequency reactions of bank funding costs to the announcement of the recalibration of 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, differently from a standard rate cut, was not accompanied by an increase in risk-taking.

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.

Beyond the Headline: How Personal Inflation Exposure Shapes Households’ Financial Choices

with Ch. Basten (University of Zurich) and M. Kukk (Bank of Estonia)


Abstract: Using unique account-level data from a high inflation period in Estonia in 2005-11 and interactive fixed effect estimation, we find individual consumption to depend on personal beyond national headline inflation. Foreign shocks to selected goods’ inflation affect disproportionately households with greater consumption basket weights on these goods and make them increase consumption by an extra 1.3% per percentage point of higher inflation exposure, financed with more net borrowing. Indebted households respond stronger, consistent with a debt depreciation effect. Resulting extra demand for goods with higher inflation can reinforce inflation, letting future inflation depend on its current distribution. 


Work in progress (drafts available upon request)

Celebrity Influencers: This is not Financial Advice

with M. Benetton (UC Berkley), W. Mullins (UC San Diego), and M. Niessner (Indiana).

Abstract: As younger adults look to social media for news and investment guidance about cryptocurrencies, a new group of `financial advisors' has emerged with an unprecedented reach – celebrity influencers. In this paper we combine survey responses and transaction-level data with real-life celebrities’ crypto-related Twitter posts to study how celebrity endorsements shape households' financial decisions. We find that a celebrity tweet is associated with a 16% higher probability that an individual invests in cryptocurrencies, with stronger effects for men, wealthier, and older investors. We also find that aggregate market trading volume in a given coin increases by 10% on the day of the celebrity tweet and stays elevated for the following two days, while returns exhibit a 3% spike with no reversal over the following week. We conclude by showing that investors would have been better off buying Bitcoin or Ethereum than the coin mentioned in the celebrity tweet. 


Inflation Relief Checks

with A. Fuster (EPFL)

(Early) Abstract:  We use transaction-level data gathered by an account aggregator fintech linked to a rich set of demographic characteristics to study the effects of inflation relief check programs, implemented in the fall of 2022, on US households' budgets. We apply a novel Machine Learning approach to estimate counterfactual spending at the individual level to characterize recipients’ responses, and study how those responses vary with individual exposure to inflation.


Geographical Ring-Fencing

with Ch. Basten (University of Zurich).

Abstract: We study the effects of the 2014 announcement of the U.S. Intermediate Holding Company (IHC) requirement for foreign banking organizations (FBOs), which ring-fenced U.S. operations and introduced local in addition to global regulatory requirements. Given the small sample setting, we apply the Synthetic Control methodology. We find that FBOs reduced U.S. assets by 35% relative to the counterfactual. As the rule made requirements for broker-dealer subsidiaries more similar to those for commercial banks and so more costly, most of the effect is driven by reductions in securities broker-dealer businesses, with likely consequences for market liquidity.