Exchange Rate Floor and Central Bank Balance Sheets: Simple Spillover Tests of the Swiss Franc
With Andreas M. Fischer
Aussenwirtschaft 67.02 (2016): 31-50

This paper examines spillover and spillback effects of unconventional monetary policies conducted by the European Central Bank (ECB) and Swiss National Bank (SNB) on the exchange rate’s distribution. The empirical setup examines the price response of EURCHF risk reversal to a change in ECB and SNB balance sheets, with a distinction for the period of the minimum exchange rate (floor). The analysis finds only weak evidence of spillover effects from the ECB, while the spillback effect from the SNB balance sheet is robust during the floor period.

Working Papers

Fuzzy Bunching
With Kairong Xiao

Existing bunching estimators infer bunching from a sharp spike at the regulatory threshold in the probability density function. Such spikes could be diffused and difficult to measure in small and noisy data. This paper introduces a new fuzzy bunching estimator that infers the extent of bunching from a bulge in the cumulative distribution function. The fuzzy bunching estimator has two advantages in small and noisy data: (1) it is more robust to diffused bunching, and (2) it avoids density estimation. Monte Carlo simulations and applications to well-established bunching settings clarify these advantages.

The Constraints on Portfolio Rebalancing: When Unconventional Monetary Policy Meets Insurance Capital Regulation
With Renxuan Wang

We examine the role of life insurers during episodes of Quantitative Easing (QE). To that end, we develop a new method to back out the duration gaps of life insurance companies based on their holdings and publicly available balance sheet information. We show that static capital regulation in the insurance sector actually could render the QE less effective: those who face higher duration gaps did not rebalance more towards corporate credits, contrary to what the portfolio rebalancing channel predicts

Watch what they do, not what they say: Estimating regulatory costs from revealed preferences
With Sakai Ando and Kairong Xiao

Regulation costs inferred from banks' endogenous response to regulation are significantly lower than self-reported estimates in surveys on banks.

Subjective Growth Expectations of Entrepreneurs
With Renxuan Wang (work-in-progress)

Using a comprehensive and proprietary data set of 80,000 entrepreneurs' own revenue growth forecasts, we show that entrepreneurs have overly optimistic projections for future revenues, and consistently revise these projections downwards (constant disappointment). We relate these findings to entrepreneurs characteristics and find that entrepreneurs with high previous salary and more time invested in the start-up are less optimistic about future growth of the company. Finally, we use this dataset to confirm the previous findings that team strength is one of the best predictor of external funding.

Transaction Costs and Volume Capacity in the Cross-Section of Corporate Bond Returns