I am a 3rd-year economics PhD student at the University of Cambridge. My research interests include macroeconomic risk and uncertainty, monetary economics, and time series methods.
I am supervised by Chryssi Giannitsarou and Elisa Faraglia.
The Downside Risk Channel of Monetary Policy
Coverage: Faculty of Economics
Abstract. This paper proposes a new transmission channel of monetary policy shocks to equity premia: Monetary shocks can affect the probability of bad outcomes for future macroeconomic growth and hence support equity prices beyond any effect on expected mean growth rates. To document this channel, I estimate a monthly index of downside risks to consumption growth. Downside consumption risk rises during recessions and contains information distinct from measures of risk aversion, uncertainty, or financial stress. A loosening in the monetary policy stance can significantly affect consumption downside risks in crisis times but has weak effects during normal times. Increases in downside risk predict higher future equity returns, in line with the disaster risk hypothesis. Consumption downside risk predicts stock markets in the aggregate and across a wide range of industry portfolios. More procyclical industries have a higher sensitivity to changes in downside risk.
The Causal Effects of Monetary Policy: New Insights from Text Analysis
(with Adrian Ochs)
Abstract. Measures of monetary shocks can give rise to the puzzling result that a monetary tightening has an expansionary effect. A possible reason is that interest rate decisions signal information about the central bank's assessment of the economy. Under this hypothesis, the estimated response to monetary policy shocks contains two conflating effects: the direct effect of the change in interest rates and the reaction of private agents to new information about the state of the economy. This paper addresses the information effect by extracting a novel series of monetary shocks using natural language processing methods on central bank documents. We measure the information that agents can obtain about the economy from an interest rate decision and use it to extract exogenous changes in monetary policy that are orthogonal to any central bank information. Using this information-free measure of monetary policy shocks reveals that a monetary tightening is contractionary for output and employment. We argue that the importance of the information effect has increased in the post-Volcker period since monetary policy has become more systematic.
Is the EU Money Market Fund Regulation fit for purpose? Lessons from the COVID-19 turmoil
(with Laura-Dona Capotă, Michael Grill, Luis Molestina Vivar, and Christian Weistroffer)
Abstract. The market turmoil in March 2020 highlighted key vulnerabilities in the EU money market fund (MMF) sector. This paper assesses the effectiveness of the EU’s regulatory framework from a financial stability perspective, based on a panel analysis of EU MMFs at a daily frequency. First, we find that investment in private debt assets exposes MMFs to liquidity risk. Second, we find that low volatility net asset value (LVNAV) funds, which invest in non-public debt assets while offering a stable NAV, face higher redemptions than other fund types. The risk of breaching the regulatory NAV limit may have incentivised outflows among some LVNAV investors in March 2020. Third, MMFs with lower levels of liquidity buffers use their buffers less than other funds, suggesting low levels of buffer usability in stress periods. Our findings suggest fragility in the EU MMF sector and call for a strengthened regulatory framework of private debt MMFs.
Micro and Macro Skewness