Working Papers
Mortgage Refinancing and the Marginal Propensity to Consume (with Simone Pesce)
This paper investigates the role of mortgage refinancing in shaping the estimates of marginal propensity to consume (MPC) and its implications for fiscal policy. Using U.S. household data, we find that MPCs decrease during the year of mortgage refinancing and stabilize afterward, particularly among households with lower liquid assets, higher debt-to-income ratios, and valuable illiquid assets. The empirical evidence suggests that refinancing provides extra liquidity, reducing MPCs. We leverage on a partial equilibrium model to quantitatively assess these effects and explore the role of home equity extractions for fiscal policy. Our findings highlight a new dimension for the efficacy of cash transfers: targeted programs that consider higher MPCs of no-refinancers generate savings between 4 and 12% compared to non-targeted programs. These estimates imply $30 billion in potential savings under the CARES Act of March 2020.
Presentations: Mini-Workshop - Research Task-Force on Heterogeneity in Macroeconomics and Finance at the European Central Bank (2024)*, 3rd Naples School of Economics PhD Workshop (2024)*, 1st Tor Vergata Ph.D. Conference in Economics (2024)*, 4th SASCA Ph.D. Conference in Economics (2024)*, Boston College (2024), 19th Economics Graduate Student Conference at Washington University in St. Louis (2024), European Central Bank DG-Research Internal Seminar (2024)*, European Central Bank DG-Economics Seminar (2024)*, Central Bank of Ireland Economics Seminar (2025)*
The Allocation of Talent and Income Differences Across Countries (with Nan Li and Robert Zymek)
Barriers that selectively limit women’s access to certain occupations constrain individual potential and undermine productivity—but how large are their macroeconomic effects? In this paper, we use a Roy model of occupation choice to derive a theoretically-founded, outcomes-based measure of female labor market barriers that can be compared across countries and time. This measure incorporates, but goes beyond, conventional gender wage gaps and is highly correlated with established gender indices. Applying the framework to harmonized income microdata for 43 diverse economies, we find that 2015 barriers for some major emerging markets were similar to 1960s barriers in the U.S. Lowering their barriers to 2015 U.S. levels would yield double-digit gains in per-capita market incomes and welfare, both by encouraging participation and by raising productivity via an improved allocation of talent. This suggests that policies aimed at reducing occupational barriers for women could be a powerful source of growth and international income convergence.
Presentations: International Monetary Fund (IMF), Federal Reserve Bank of Chicago, Universitat Pompeu Fabra CREI @30 Conference*, Waseda University*
How Does Mobile Payment Technology Affect Consumer Payment Behavior?
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Mobile payment technology has been enjoying a rising popularity among consumers. While the innovation provides convenience, it could also facilitate consumers’ substitution of currency and checks by cards. Furthermore, the technology could affect consumers’ credit card behavior. Understanding these possible effects of payment innovation is important for maintaining a healthy financial system and consumers’ well-being. This project investigates the effect of mobile payment technology on consumer payment behavior in the context of consumers’ choice of point-of-sale (POS) instruments and its implications for credit card behavior. Using a panel of U.S. consumers from 2015 to 2018, I find that mobile payment technology is positively associated with credit card use while being negatively associated with cash and check use. Applying the heteroskedasticity-based instrumental variable-generalized method of moments approach, I find arguably causal evidence that mobile payment technology leads to a higher probability of using revolving credit as well as higher revolving balances.
Presentations: The 3rd Toronto Fintech Conference-Western University Ivey Business School
Work in Progress
Uncertainty, Firm Heterogeneity, and Misallocation [Draft Coming Soon]
This paper examines how uncertainty differentially affects firms and the implications for capital allocation. Using panel data on U.S. manufacturing firms from COMPUSTAT, I show that when uncertainty rises, undercapitalized firms with high marginal revenue product of capital (MRPK) slow investment more sharply than firms with low MRPK. A 0.5-unit increase in the uncertainty measure of Jurado et al. (2015)—roughly the shift from a tranquil period to a moderately volatile quarter—leads a high-MRPK firm (80th percentile) to experience an additional 1.54 percentage point drop in capital growth relative to a low-MRPK firm (20th percentile), indicating that capital does not flow toward the most productive firms. Linking COMPUSTAT with CRSP data, I show that this heterogeneous response reflects a risk-based mechanism: high-MRPK firms exhibit systematically higher exposure to aggregate market risk. Leveraging an investment model that incorporates firms’ exposure to aggregate risk and the countercyclicality of the price of risk, I show that when uncertainty spikes, firms equalize risk-adjusted MRPKs, disproportionately affecting high MRPK firms. With greater exposure to aggregate market risk, these firms face higher costs of capital driven by rising risk premiums, requiring even higher MRPKs to justify expected returns and prompting them to slow down investment more sharply to maintain optimality.
Presentations: Federal Reserve Bank of Chicago, Boston College
(*) Paper presented by co-author