Research

WORKING PAPERS

“Investor Heterogeneity and Large-Scale Asset Purchases” with Johannes Breckenfelder -  Reject and Resubmit at Journal of Finance 

We show that the impact of large-scale asset purchases depends on cross-sectional and time-varying heterogeneity in the investor base. Using security-level holdings across investor types, we find that bonds held by more price-elastic investors exhibit significantly smaller yield responses — 40% lower at the 50th versus 25th percentiles of the elasticity distribution. The impact is non-linear and intensifies as the stock of purchases grows, because the investor base becomes more inelastic. We construct a novel shift-share instrument and show that portfolio rebalancing raises prices of non-eligible assets. The strength of these spillovers depends both on investor elasticity and their exposure to purchases.

“Investing in Safety” with Johannes Breckenfelder and Marie Hoerova

We study how the first large-scale joint issuance of EU debt transmits to the market for euro-area national sovereign bonds. Using security-level holdings across investor types, we construct a shift-share instrument that combines investors’ pre-issuance exposure to supranational debt with the legislated path of EU issuance. Investors with greater exposure absorb more EU bonds and fund these purchases by rebalancing away from national sovereign debt, especially from the AAA and AA rating segments. This rebalancing moves prices: bonds facing greater predicted selling pressure experience larger yield increases. At the rating-segment level, predicted pressure also widens yield spreads to the OIS rate in the safest segments, consistent with a decline in convenience yields.

PAPERS IN PROGRESS

“Import Prices and Domestic Inflation”

The 2021–2023 inflation surge was characterized by inflation rising in many countries simultaneously due to a mix of, domestic and foreign, supply and demand factors. I investigate the impact of an increase in import prices on domestic inflation. I use monthly bilateral trade data by country-industry for which both the quantity and prices of imported goods are reported at the 4- digits commodity level. I propose a shift-share Bartik-style instrument to estimate the elasticity of domestic inflation to import prices. The quasi-exogenous variation is based on exposure to global import prices of products across countries. Preliminary results show that a 1% increase in import prices increases domestic inflation by 6-10 basis points.