The Anatomy of the Transmission of Macroprudential Policies  
Journal of Finance
, forthcoming.
Co-author: Viral AcharyaKatharina BergantTim EisertFergal McCann

Paper  ·  BibTeX  ·  Google Scholar

Bank Capital, Government Bond Holdings, and Sovereign Debt Capacity  
Journal of Financial Economics
, 141(2), August 2021, 693-704.
Klaus Liebscher Award.
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The Design and Transmission of Central Bank Liquidity Provisions  
Journal of Financial Economics
, 141(1), July 2021, 27-47.
Co-author: Luisa Carpinelli
ECB Young Economist Award.
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The (Unintended?) Consequences of the Largest Liquidity Injection Ever  
Journal of Monetary Economics
, 112, June 2020, 97-112.
SUERF/UniCredit Foundation Research Prize.

Co-authors: Miguel Faria-e-Castro and Luìs Fonseca
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Working Papers

Zombie Credit and (Dis-)Inflation: Evidence from Europe

Being revised for resubmission at the Journal of Finance
Co-authors: V. AcharyaT. Eisert, C. Eufinger, December 2020
Paper · BibTeX · VoxEU · WSJ · FT · Liberty Street

FRBNY/NYU FI 2019, MonPolicy & Reality, FIRS 2020, Cavalcade 2020, WFA 2020, AFA 2021

Abstract: We show that “zombie credit”—cheap credit to impaired firms—has a disinflationary effect. By helping distressed firms to stay afloat, such credit creates excess production capacity, thereby putting downward pressure on product prices. Granular European data on inflation, firms, and banks confirm this mechanism. Industry-country pairs affected by a rise of zombie credit show lower firm entry and exit rates, markups, and product prices, as well as a misallocation of capital and labor, which results in lower productivity, investment, and value added. Without a rise in zombie credit, inflation in Europe would have been 0.4 percentage points higher post-2012.

Pirates without Borders: the Propagation of Cyberattacks through Firms’ Supply Chains 
Co-authors: Marco Macchiavelli and André Silva, July 2021
Being revised for resubmission at the Journal of Financial Economics
NBER CF Spring 2021
Paper · BibTeX · Liberty Street

AbstractWe document the supply chain effects of the most damaging cyberattack in history. The disruptions propagated from the directly hit firms to their customers, causing a four-fold amplification of the initial drop in profits. These losses were larger for affected customers with fewer alternative suppliers.  Internal liquidity buffers and increased borrowing, mainly through bank credit lines, helped firms navigate the shock. The cyberattack also led to persisting adjustments to the supply chain network, with affected customers more likely to create new relationships with alternative suppliers and terminate those with the directly hit firms.

Exorbitant Privilege? The Bond Market Subsidy of Prospective Fallen Angels
Co-authors: Viral Acharya, Ryan BanerjeeTim EisertRenée Spigt, July 2021
AFA 2022 · NBER SI EFEL 2021 ·  Oxford-ETH Macro-Finance 2021 
·  MoFiR 2021
Paper · BibTeX

AbstractRisky firms just above the investment-grade rating cutoff face the prospect of becoming “fallen angels'” upon a downgrade. We document that their bond issuance, especially during periods of monetary easing after the global financial crisis, enjoyed low borrowing costs relative to their non-rating based credit risk measures. This “exorbitant privilege” appears to originate in credit rating inflation, valued by yield-seeking investors. Prospective fallen angels increase their market share by acquiring firms and reducing markups, forcing their competitors to reduce employment, investment, markups, and sales, implying real effects and spillovers from their exorbitant privilege.

Other Papers

Zombie Lending: Theoretical, International, and Historical Perspectives
In preparation for the Annual Review of Financial Economics, November 2022
Co-authors: Viral AcharyaTim Eisert, and Sascha Steffen