Research

WORKING PAPERS

“Investor Heterogeneity and Large-Scale Asset Purchases” with Johannes Breckenfelder -  (Job Market Paper)

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 offer an investor-based perspective on the demand for safe assets and the determination of convenience yields. Using proprietary securities holdings data, we characterize the investor base of both national and supranational safe assets in Europe. To determine who the marginal investor is, we exploit the largest ever joint issuance of supranational bonds by the European Commission to link how different investors rebalance their portfolios following this large shock to the supply of safe assets. We show that, for the same security, the marginal investors in supranational bonds are mutual funds and banks. These investors view the AAA-rated Commission bonds as substitutes for other supranational bonds. To study portfolio re-balancing of investors we construct an instrument based on their ex-ante propensity to hold other supranational bonds. We show that when they acquire Commission bonds, they re-balance away from other supranational bonds and, as a result, the yields on those bonds increase. However, investors do not view the Commission bonds as substitutes for national government bonds. We show that this result is driven by the domestic investors who do not substitute away from national bonds following the Commission bond issuance. Such home bias of domestic investors towards national bonds may help explain why the AAA-rated Commission bonds have substantially higher yields compared to national government AAA-rated securities.

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.