Research Interests
Financial Economics, Financial Stability, Banking.
Macroeconomics and International Finance.
Research Papers
"The Impact of Interest Rate Risk on Bank Lending" (2017) SNB Working Papers 4/2017, DEEP Working Paper 15.09, Study Center Gerzensee Working Paper 15.05, with Robert Bichsel, Adrian Bruhin and Jayson Danton.
Abstract: In this paper, we empirically analyze the transmission of realized interest rate risk - the gain or loss in a bank's economic capital caused by movements in interest rates - to bank lending. We exploit a unique panel data set that contains supervisory information on the repricing maturity profiles of Swiss banks and provides us with an individual measure of interest rate risk exposure net of hedging. Our analysis yields two main results. First, the impact of an interest rate shock on bank lending significantly depends on the individual exposure to interest rate risk. The higher a bank's exposure to interest rate risk, the higher the impact of an interest rate shock on its lending. Our estimates indicate that a year after a permanent 1 percentage point upward shock in nominal interest rates, the average bank in 2013Q3 would, ceteris paribus, reduce its cumulative loan growth by approximately 300 basis points. An estimated 12.5% of the impact would result from realized interest rate risk weakening the bank's economic capital. Second, bank lending appears to be mainly driven by capital rather than liquidity, suggesting that a higher capitalized banking system can better shield its creditors from shocks in interest rates.
"Forecasting Exchange Rates with Commodity Convenience Yields" (2012), Study Center Gerzensee Working Paper No. 12.03
Abstract: This paper investigates whether commodity convenience yields - the yields that accrue to the holders of physical commodities - can predict the exchange rate of commodity-exporters' currencies. Predictability is a consequence of the fact that i) convenience yields are useful predictors for commodity prices and ii) commodity currencies have a strong relationship with commodity prices. The empirical evidence indicates that there is a signi cant relationship between aggregate measures of convenience yields and commodity currencies' exchange rate, both in-sample and out-of-sample. A high level of convenience yields strongly predicts a depreciation of the Australian, Canadian and New Zealand dollars exchange rates at horizons of 1 to 24 months.
Publications
"The Collateral Channel Under Imperfect Debt Enforcement" (2019) European Economic Review, Vol. 111, pp. 336 - 358, with Mathieu Grobéty. (Older version and Web appendix)
Abstract: Does imperfect enforceability of debt contracts affect the sensitivity of industry growth to collateral values? To answer this question, we introduce a novel industry-specific measure of real asset redeployability - the ease with which real assets are transfered to alternative uses - as a proxy for liquidation values of collateral. Our measure exploits the heterogeneity of expenditures in new and used capital and the heterogeneity in the composition of real asset holdings across U.S. industries. Using a cross-industry cross-country approach, we find that industry growth is more sensitive to changes in collateral values in countries with weaker debt enforcement.
"Can Parameter Instability Explain the Meese-Rogoff Puzzle" (2010), in Lucrezia Reichlin and Kenneth D. West (eds.) NBER International Seminar on Macroeconomics 2009, pp. 125-173, with Philippe Bacchetta and Eric Van Wincoop.
Abstract: The empirical literature on nominal exchange rates shows that the current exchange rate is often a better predictor of future exchange rates than a linear combination of macroeconomic fundamentals. This result is behind the famous Meese-Rogoff puzzle. In this paper we evaluate whether parameter instability can account for this puzzle. We consider a theoretical reduced-form relationship between the exchange rate and fundamentals in which parameters are either constant or time varying. We calibrate the model to data for exchange rates and fundamentals and conduct the exact same Meese-Rogoff exercise with data generated by the model. Our main finding is that the impact of time-varying parameters on the prediction performance is either very small or goes in the wrong direction. To help interpret the findings, we derive theoretical results on the impact of time-varying parameters on the out-of-sample forecasting performance of the model. We conclude that it is not time-varying parameters, but rather small sample estimation bias, that explains the Meese-Rogoff puzzle.
Work in Progress
« Is there an asymmetric bank lending channel in Switzerland? », with Matthias Gubler, Simona Hauri and Sylvia Kaufmann
"On the Ability of Exchange Rates to Forecast Commodity Prices"
Abstract: This paper investigates whether the ability of commodity currencies' exchange rates to predict commodity prices is the result of commodity prices being less forward-looking than exchange rate. First, I explore the heterogeneity in the forward-looking behavior of individual commodities using spot and futures prices. Second, I evaluate the ability of the Australian, Canadian and New Zealand Dollar exchange rates to predict individual spot commodity prices. Relating the outcomes of both exercises, I find some (although weak) evidence that those commodities whose prices are predictable using commodity currencies' exchange rates are also the less forward-looking ones.
Financial Economics, Financial Stability, Banking.
Macroeconomics and International Finance.
Research Papers
"The Impact of Interest Rate Risk on Bank Lending" (2017) SNB Working Papers 4/2017, DEEP Working Paper 15.09, Study Center Gerzensee Working Paper 15.05, with Robert Bichsel, Adrian Bruhin and Jayson Danton.
Abstract: In this paper, we empirically analyze the transmission of realized interest rate risk - the gain or loss in a bank's economic capital caused by movements in interest rates - to bank lending. We exploit a unique panel data set that contains supervisory information on the repricing maturity profiles of Swiss banks and provides us with an individual measure of interest rate risk exposure net of hedging. Our analysis yields two main results. First, the impact of an interest rate shock on bank lending significantly depends on the individual exposure to interest rate risk. The higher a bank's exposure to interest rate risk, the higher the impact of an interest rate shock on its lending. Our estimates indicate that a year after a permanent 1 percentage point upward shock in nominal interest rates, the average bank in 2013Q3 would, ceteris paribus, reduce its cumulative loan growth by approximately 300 basis points. An estimated 12.5% of the impact would result from realized interest rate risk weakening the bank's economic capital. Second, bank lending appears to be mainly driven by capital rather than liquidity, suggesting that a higher capitalized banking system can better shield its creditors from shocks in interest rates.
"Forecasting Exchange Rates with Commodity Convenience Yields" (2012), Study Center Gerzensee Working Paper No. 12.03
Abstract: This paper investigates whether commodity convenience yields - the yields that accrue to the holders of physical commodities - can predict the exchange rate of commodity-exporters' currencies. Predictability is a consequence of the fact that i) convenience yields are useful predictors for commodity prices and ii) commodity currencies have a strong relationship with commodity prices. The empirical evidence indicates that there is a signi cant relationship between aggregate measures of convenience yields and commodity currencies' exchange rate, both in-sample and out-of-sample. A high level of convenience yields strongly predicts a depreciation of the Australian, Canadian and New Zealand dollars exchange rates at horizons of 1 to 24 months.
Publications
"The Collateral Channel Under Imperfect Debt Enforcement" (2019) European Economic Review, Vol. 111, pp. 336 - 358, with Mathieu Grobéty. (Older version and Web appendix)
Abstract: Does imperfect enforceability of debt contracts affect the sensitivity of industry growth to collateral values? To answer this question, we introduce a novel industry-specific measure of real asset redeployability - the ease with which real assets are transfered to alternative uses - as a proxy for liquidation values of collateral. Our measure exploits the heterogeneity of expenditures in new and used capital and the heterogeneity in the composition of real asset holdings across U.S. industries. Using a cross-industry cross-country approach, we find that industry growth is more sensitive to changes in collateral values in countries with weaker debt enforcement.
"Can Parameter Instability Explain the Meese-Rogoff Puzzle" (2010), in Lucrezia Reichlin and Kenneth D. West (eds.) NBER International Seminar on Macroeconomics 2009, pp. 125-173, with Philippe Bacchetta and Eric Van Wincoop.
Abstract: The empirical literature on nominal exchange rates shows that the current exchange rate is often a better predictor of future exchange rates than a linear combination of macroeconomic fundamentals. This result is behind the famous Meese-Rogoff puzzle. In this paper we evaluate whether parameter instability can account for this puzzle. We consider a theoretical reduced-form relationship between the exchange rate and fundamentals in which parameters are either constant or time varying. We calibrate the model to data for exchange rates and fundamentals and conduct the exact same Meese-Rogoff exercise with data generated by the model. Our main finding is that the impact of time-varying parameters on the prediction performance is either very small or goes in the wrong direction. To help interpret the findings, we derive theoretical results on the impact of time-varying parameters on the out-of-sample forecasting performance of the model. We conclude that it is not time-varying parameters, but rather small sample estimation bias, that explains the Meese-Rogoff puzzle.
Work in Progress
« Is there an asymmetric bank lending channel in Switzerland? », with Matthias Gubler, Simona Hauri and Sylvia Kaufmann
"On the Ability of Exchange Rates to Forecast Commodity Prices"
Abstract: This paper investigates whether the ability of commodity currencies' exchange rates to predict commodity prices is the result of commodity prices being less forward-looking than exchange rate. First, I explore the heterogeneity in the forward-looking behavior of individual commodities using spot and futures prices. Second, I evaluate the ability of the Australian, Canadian and New Zealand Dollar exchange rates to predict individual spot commodity prices. Relating the outcomes of both exercises, I find some (although weak) evidence that those commodities whose prices are predictable using commodity currencies' exchange rates are also the less forward-looking ones.
