Papers-in-progress
Papers-in-progress
Embedded Files
Monetary Transmission in Equity Markets: Evidence from Financial Intermediaries, with M. Famiglietti
[PDF]
Presented at (including upcoming): SGF Conference 2026, MFA Annual Meeting 2026, 19th International Behavioural Finance Conference at the University of Chicago 2025, AFA Posters 2025, Midwest Macro Meetings at Purdue University 2024.
We show that equity flows across financial intermediaries amplify monetary policy transmission to asset prices. Using institutional portfolio data, we find that mutual funds with performance-sensitive investors experience outflows after contractionary shocks, triggering forced equity sales. Banks — whose funding is less sensitive to recent performance — absorb these sales and provide liquidity. This intermediary-level heterogeneity aggregates meaningfully: stocks held by more performance-sensitive investors exhibit larger price declines following monetary tightening. To explain these patterns, we develop an intermediary asset pricing model where heterogeneous intermediaries manage portfolios for investors with performance-sensitive flows, highlighting a novel mechanism of monetary transmission in equity markets.
We show that equity flows across financial intermediaries amplify monetary policy transmission to asset prices. Using institutional portfolio data, we find that mutual funds with performance-sensitive investors experience outflows after contractionary shocks, triggering forced equity sales. Banks — whose funding is less sensitive to recent performance — absorb these sales and provide liquidity. This intermediary-level heterogeneity aggregates meaningfully: stocks held by more performance-sensitive investors exhibit larger price declines following monetary tightening. To explain these patterns, we develop an intermediary asset pricing model where heterogeneous intermediaries manage portfolios for investors with performance-sensitive flows, highlighting a novel mechanism of monetary transmission in equity markets.
Facing Default?, with M. Guenzel, S. Kogan, M. Niessner & K. Shue
Presented at: Boulder Summer Conference on Consumer Financial Decision Making 2025.
(Draft coming soon)
(Draft coming soon)
Presented at (including upcoming): MFA Annual Meeting 2026, 6th RCF-ECGI Corporate Finance and Governance Conference 2025, Bank of Finland's Banking Workshop 2024, Indian Management Research Conference at IIM Ahmedabad 2024.
This paper find that politics worsens risk-shifting at government-led banks in India. Following a system-wide asset quality review that revealed state-owned banks to have large amounts of undisclosed bad loans, I find that higher government ownership led to larger ex-post capital injections. These taxpayer-funded bailouts came with political strings: credit was reallocated toward electorally strategic, but low-productivity, borrowers. Undercapitalized state-owned banks made new loans to zombie firms and risky politically connected firms, whereas private and better-capitalized banks improved loan quality. Comparing credit allocation at branches within the same state-owned bank, I find that branches in election constituencies increase zombie lending; the same banks' non-election branches do not. These patterns are absent at private banks or in off-election years. Politically driven credit crowds out politically unconnected private firms, which reduce investment by 7 percent, as an unintended consequence of supervision.
This paper find that politics worsens risk-shifting at government-led banks in India. Following a system-wide asset quality review that revealed state-owned banks to have large amounts of undisclosed bad loans, I find that higher government ownership led to larger ex-post capital injections. These taxpayer-funded bailouts came with political strings: credit was reallocated toward electorally strategic, but low-productivity, borrowers. Undercapitalized state-owned banks made new loans to zombie firms and risky politically connected firms, whereas private and better-capitalized banks improved loan quality. Comparing credit allocation at branches within the same state-owned bank, I find that branches in election constituencies increase zombie lending; the same banks' non-election branches do not. These patterns are absent at private banks or in off-election years. Politically driven credit crowds out politically unconnected private firms, which reduce investment by 7 percent, as an unintended consequence of supervision.
From Collateral to Credit to Real Activity: Causal Evidence on the Bank Lending Channel, with A.-L. Delatte & J. Imbs
[PDF]
Using a unique identification methodology, we show that easing collateral requirements has economy-wide effects on firms' real outcomes through increased credit. These effects benefit all firms, not just those with newly eligible collateral. By categorizing banks based on their pre-reform loan portfolios, we compare banks with varying exposures to the change in collateral constraints but otherwise similar loan portfolios. We introduce a bank-level metric for firms' real outcomes, calculated as a loan-weighted average across borrowers, which enables us to use the same identification for both credit and real effects. The impacts on credit, investment, productivity, and dividends are large.
Presented at: New York University, AFA Posters 2026, Midwest Macro Meetings at Federal Reserve Bank of Cleveland 2025.
Heterogeneity in monetary transmission arises from differences between industry leaders and followers (firms with high and low market shares). We present evidence that the cost of capital and investment responses of industry leaders are less sensitive to monetary shocks. This is true even in the absence of financial constraints and differences in product characteristics, requiring an explanation of monetary policy heterogeneity without financial frictions. We argue that industry leaders not only have higher productivity but also profits that are less sensitive to aggregate economic fluctuations, possibly due to stronger incentives to develop inelastic consumers. Reduced cyclicality in profits ensures that leaders are less affected by monetary policy, therefore maintain stable investment expenditures. Furthermore, since we document heterogeneity with respect to market shares rather than size alone, we argue that there are persistent implications for industry dynamics. Our findings highlight unexplored distributional consequences of monetary policy that extend beyond typical financial frictions.
Heterogeneity in monetary transmission arises from differences between industry leaders and followers (firms with high and low market shares). We present evidence that the cost of capital and investment responses of industry leaders are less sensitive to monetary shocks. This is true even in the absence of financial constraints and differences in product characteristics, requiring an explanation of monetary policy heterogeneity without financial frictions. We argue that industry leaders not only have higher productivity but also profits that are less sensitive to aggregate economic fluctuations, possibly due to stronger incentives to develop inelastic consumers. Reduced cyclicality in profits ensures that leaders are less affected by monetary policy, therefore maintain stable investment expenditures. Furthermore, since we document heterogeneity with respect to market shares rather than size alone, we argue that there are persistent implications for industry dynamics. Our findings highlight unexplored distributional consequences of monetary policy that extend beyond typical financial frictions.
Technical reports
Technical reports
Monetary Policy Transmission in India: New Evidence from Firm-Bank Matched Data, Reserve Bank of India, Working Paper Series (DEPR) 01/2021
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